Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 17

Scott Healthcare provides a walk-in clinic for its patients and a pharmacy for any medication prescribed by the doctor. Last year Scott generated total sales of $500,000 and $100,000 in profits. Scott also had average assets of $250,000 for the year. What are Scott Healthcare’s return on sales, asset turnover, and return on investment?

Step 1 of 4

Return on sales:

Return on sales defines that how an organization effectively convert their sales into the income. Return on sales can be computed by doing the divide from operating income by net sales.

Assets turnover:

Assets turnover ratio is the ratio that it measures the volume of the organization’s income or profits compared to the cost of assets. This is also used in efficiency, from which an enterprise uses its assets to produce revenue.

Return on investment:

Return on investment may be defined as the ratio lies between the net income and the investment cost. It measures and compares the efficiency of different type of investment so that the performance could be evaluated.