Portable Pet Care, Inc., has recorded the following on its income statement for the period ending December 31, 2019:
The return on sales = 34%. This return is outstanding and there is no need to compare this return to competitors in the veterinary services industry.

Question

Portable Pet Care, Inc., has recorded the following on its income statement for the period ending December 31, 2019:
  The return on sales = 34%. This return is outstanding and there is no need to compare this return to competitors in the veterinary services industry.

Quizplus · Accepted Answer

While the calculation is accurate: Net income after taxes/net sales = $85,000/$250,000 = .34 or 34%, in order to determine if this is a good return, the firm would need to compare it with the ratio of competitor firms in the same industry.