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ratiosheet - Ratio COGS to Sales Gross...

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Ratio Formula Desired Trend COGS to Sales (COGS/Net Sales)*100=% L - the lower the cost=better cost control or increase in selling price or both Gross ProfittoSales(coverfixed (Gross Profit/Net Sales)* 100=% H - the higher the more received on each sale Operating Expenses to Sales (Op X/Net Sales)*100=% L- the lower the more efficient/less expenses = advantage over competition say if some shud be higher/lwr Net Income or EBIT to Sales (Net Income/Net Sales)*100=% H- the higher the more profitable each sale If sales increased then fixed costs spread over larger sales volume (lwr fixed cost)=not bc of management but bc of sales Inventory Turnover how many times a yr is INV sold? (COGS/Avrg Inventory)=x H= better (but depends on type) too low = inventory sits around too long = obsolescence, shrinkage, storage cost too high = can’t meet demand/lose sales & cost associated with using $ for this (low rate of return), better opportunities, idle resource, expediting = rush to order thru Fixed Asset Turnover How many sales dollars earned for every dollar of fixed assets? Measures how useful fixed assets are to the business (Net Sales/Avrg Fixed)=x H=better-hard to compare bc diff amort eq’n, lease/rent, inventory policies too low=useless assets that can be sold (investment coming up) Too high=sign that assets are old (high AA) so needs to be replaced (sold/more amort) Total Asset Turnover How many sales dollars earned for
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