Ratios of profits to sales and to identifiable assets can help to analyze profitability by segment.

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Ratios of profits to sales and to identifiable assets are commonly used in segment analysis to measure the profitability of each segment. The profit/sales ratio indicates how much of each dollar of sales is converted into profits, while the profit/assets ratio shows how efficiently assets are used to generate profits. By comparing these ratios across segments, managers can identify the most profitable and efficient segments, and allocate resources accordingly.

Ratios of Profits to Sales and to Identifiable Assets Can