D1. ROS, ROA, ROE, Leverage, Sales, Profits

* Return on Sales (ROS) – ROS is the percentage of each dollar of sales that is left as a profit. For example if a company has $100 in revenue and $20 in profit, at the end of the period they have a ROS of 20%. ROS is best used when compared to other companies within the same industry. This is because different industries can have different levels of ROS depending on the competitiveness level. Competiveness can drive prices down overall in the industry, which will drive down ROS for all companies. A high ROS can indicate premium pricing in the industry or great efficiency where as a low ROS can be an indicator of financial trouble such as a company slashing prices just to garner revenue to cover fixed costs. The table below shows our ROS for each year compared to the industry. The graph following shows the ROS for Andrews alone over time.

Bottom Rung 2 (Andrews) struggled compared to the industry in years 1 through 6 with an average of 2.2% (industry average of 4.3%). In the last two years we rebounded well with an average of 9% in ROS compared to the industry average of 8.8%. One of the variables that we got under control to make this improvement was our Inventory Carry cost. For the first 6 years we averaged $1,786 in carry cost compared to an average of $336 in the last 2 years (81% improvement). Unfortunately, part of the reason for improved inventory carry cost was a byproduct of what restricted our ROS from going even higher which was stock outs. In year 7, we had stock outs in 7 of our 8 products. Year 8 improved slightly with 5 of 8 products stocking out. These stock outs limited our ROS because additional production would have led to additional sales without an increased in fixed costs. More revenue without an increase in fixed costs leads to higher profits which would have increased our