Marketing and Financial

Plan

1
 Introduction
 The Entrepreneur needs to develop at
least one unique Product/Service as soon
as the firm starts up.

 However, if the product is not sold as

originally planned, the firm will
experience its first “death valley” due to a
cash flow problem, which in the worst
scenario that will lead to bankruptcy
2
What is Marketing
 Marketing is a product or service selling
related overall activities.
 It generates the strategy that underlies sales
techniques, business communication, and
business developments.
 It is an integrated process through which
companies build strong customer
relationships and create value for their
customers and for themselves.
3
Cont’d
 Marketing is defined by the AMA as

“Marketing is the activity, set of institutions,

and processes for creating, communicating,
delivering, and exchanging offerings that
have value for customers, clients, partners,
and society at large. ”

4
Cont’d
 Marketing is used to identify the
customer, satisfy the customer, and
keep the customer.

 The term marketing concept holds

that achieving organizational goals
depends on knowing the needs and wants
of target markets and delivering the
desired satisfactions.
5
Marketing Strategy
 The concept of marketing strategy
encompasses the strategy involved in the
management of a given product.

 A plan is required in order to effectively

manage company’s products and evidently,
a company needs to weight up and ascertain
how to utilize its finite resources. 6
Some prominent marketing strategy
models include:

 Marketing specializations: reorientation

of business marketing strategies to meet
the challenges of the global marketplace
 Buying behavior: behavioral process of
how a given product is purchased (B2C or
B2B)
 Use of technologies
 Services marketing… 7
 Market research and marketing research are
often confused.

 'Market' research is simply research into a

specific market. It is a very narrow concept.

 'Marketing' research is much broader. It not

only includes 'market' research, but also
areas such as research into new products, or
modes of distribution such as via the
Internet. 8
 Marketing research

 Marketing research is the function that links the

consumer, customer, and public to the marketer
through information - information used to
identify and define marketing opportunities and
problems; generate, refine, and evaluate
marketing actions; monitor marketing
performance; and improve understanding of
marketing as a process.
9
Cont’d
 Marketing research is the process by which
information about the market environment
is generated, analyzed, and interpreted for
use as an aid to marketing decision making
 Remember! Marketing Research does not
forecast with certainty what will happen in
the future

10
Cont’d…
 The marketing research process

includes five P’s

(1) Purpose of the research,

(2) Plan of the research,

(3) Performance of the research,

(4) Processing of research data, and

(5) Preparation of a research report. 11

 1. Purpose of the Research
The purpose of the research is to clarify the
following:

 The current situation involving the

problem/situation to be researched

 The nature of the problem/situation

 The specific questions the research is

designed to investigate. 12
 2. Plan for the Research

 Some of the key terminologies are as follows:

 Primary data: data collected specifically for the
research problem under investigation.
 Secondary data: data previously collected for other
purposes, but can be used for the problem at hand.
 Qualitative research: typically involving face-to-
face interviews with respondents (focus groups
and long interviews).
 Quantitative research: systematic procedures
designed to obtain and analyze numerical data. 13
 Some Quantitative researches include
 Observational research—watching people
 Survey research— questionnaire by mail,
phone, or in person
 Experimental research— manipulating one
variable and examining its impact on other
variables.
 Mathematical modeling research —typically
involving secondary data, such as scanner
data collected and stored in computer
files from retail checkout counters. 14
3. Performance of the Research
 This process involves preparing for
data collection as well as actually
collecting data.

 Questionnaire preparation and actual

data collection should be done
carefully.

15
4. Processing of the Research Data

 Qualitative research data consist of

interview records that are content-
analyzed for ideas or themes.

 Quantitative research data may be

analyzed in a variety of ways
depending on the objectives of the
research.
16
5. Preparation of the Research Report
 The limitations of the research should be
carefully noted.
 Test market areas may not be
representative of the market in general, or
sample size and design may be incorrectly
formulated, partially because of budget
constraints.
 Remembering and carefully taking care of
the above points, the research report assists
in directing the marketing strategy of a
company 17
Target Market

18
Target Market
 A target market is a group of customers that
the business has decided to aim its
marketing efforts and ultimately its
merchandise towards.
 A well-defined target market is the first
element to a marketing strategy.
 Once these distinct customers have been
defined, a marketing mix strategy can be
built by the business to satisfy the target
market. 19
Target Market
 Widely used criteria or dimensions for market
segmentation include
 1. Demographic
 These factors include age, gender, race,
education, marital status, income etc…
 2. Psychographic
 Attitude, interests, and opinions (AIO) comprise
the psychographic dimensions. These may be
socio-cultural, religious, philosophical, ethical,
political, economic, technological etc…
20
Cont’d
3. Usage Related
This category deals with how the
product is actually used.
 Quantity: A large bottle of wine is a product
for heavy drinkers, and a half-size lunch is a
product for weight watchers.
 Timing: and most clothes are seasonal
products.
 Application: The specific purpose of usage is
critical. Medical doctors and their patients do
not hesitate to purchase expensive devices
21
 Marketing Mix Four Ps
 The marketing mix is the set of controllable
variables that must be managed to satisfy the
target market and achieve organizational
objectives.
 These controllable variables are usually
classified according to four major decision
areas—four Ps: product, price, place (or
channels of distribution), and promotion

22
 1. Product
 Product differentiation is the most essential factor
to marketing promoters. You must differentiate
your product from your competitors’ products in
the following ways:
 Quality: the product requires reliability and
lifetime.
 Quantity: You need to produce the product as
much as the market desires
 IP protection: Is your product protected from
imitation manufacturing by other companies?

23
 Product Life Cycle
 Every product has a life cycle. The
product life cycle is segmented into
 Introduction,
 Growth,
 Maturity,
 Saturation,
 Decline, and finally
Are sometimes
 Abandonment. merged together
24
Product Life Cycle

25
Product Life Cycle

26
1. Introduction: This stage is characterized
by research and development (R&D).
Sales and profit are usually very low,
although costs may be substantial.
2. Growth: This stage is characterized by
increased sales and initial profits. Heavy
promotional costs are often incurred,
which hinder gross profit.

27
3. Maturity: This stage is characterized
by the peak and attempted
maintenance of sales levels.
4. Saturation: The maximum profit is
usually obtained sometime after the
maximum production quantity
(saturation) occurs.

28
5. Decline: This stage is characterized
by perceived futility in an attempt to
maintain market share.
 Typically, this is accompanied by cost
cutting.
6. Abandonment: At this stage the
product’s performance no longer
merits inclusion in the firm’s product
line.
29
 2. Price

 Price is what the customer pays for

the product. Four pricing schemes
are introduced here:

1. Cost-plus pricing,
2. Fair/parity pricing,
3. Skimming pricing, and
4. Penetration pricing 30
1. Cost-Plus Pricing
 The product should not be sold for less than
the manufacturing cost. The concept of cost-
plus pricing involves setting a price that
factors into a given profit margin (e.g., cost
plus 25% profit).

2. Fair/Parity Pricing
 Set based on customer-oriented market
research. This pricing involves setting a price
that roughly matches that of competing
brands within the product class.
31
3. Skimming Price
 This option involves charging a high
price relative to other brands within the
product class.
 The success depends on the high product
quality and differentiated performance.
(E.g. Sony’s products sell well even when
the price is 20% higher than other brand
products.)
4. Penetration Price
 This scheme involves charging a low price
on the assumption of selling the brand in 32

enormous quantities.
 Most high-tech entrepreneurs will
accept a compromise between the
skimming price and cost plus price.

33
3. Place
 Place means the product’s channels of
distribution or how it is conveyed from the
producer to the end user.
Its functions include manufacturing,
transportation, warehousing, wholesaling, and
retailing.
 The more the intermediate functions or channels
are involved, the higher the percentage of
selling price it can command.

34
Place
 If an organization controls all the
channels of distribution for its
product, it is vertically integrated .
 If the manufacturer acquires a
company to access the raw materials,
it is backward integrated
 If the wholesaler acquires a
retailer to expand distribution, it is
called forward integrated .
35
 4. Promotion

 Promotion involves communication

of the product attributes and the
corporate image in the most favorable
light possible to intermediary sellers
(i.e., trade advertising and trade
promotion) and to end users (i.e.,
consumer advertising and consumer
promotion).
36
37
Financial Plan
Financial Plan
 This plan allocates future income to various
types of expenses, such as rent or utilities, and
also reserves some income for short-term and
long-term savings.
 Financial planning is the long-term process of
wisely managing your finances so you can
achieve your goals and dreams, while at the
same time negotiating the financial barriers
that inevitably arise in every stage of your
business.

39
 Financial Reporting
 Common mistake among business owners:
“Failing to collect and analyze basic financial
data.”
 One-third of entrepreneurs run their companies
without any kind of financial plan.
 Only 11 percent of business owners analyze
their companies’ financial statements as part of
the managerial planning process.
 Financial planning is essential to running a
successful business and is not that difficult!

40
Cont’d
 A firm needs to generate their
annual financial report by law,
which includes the balance sheet ,
income statement , and cash-flow
statement .
 These financial statements should
be prepared according to Generally
Accepted Accounting Principles
(GAAP). 41
Balance Sheet
 The balance sheet is a “snapshot” of a
business at a particular point in time.
 It reveals financial resources the company
owns (assets), debts it owes to the others
(liabilities)
 Built on the accounting equation:
Assets = Liabilities + Owner’s
Equity
 Net income (or net loss) represents the net
profitability of the firm. This is
commonly referred to as its bottom line 42
43
 Income Statement
 Income Statement – “Moving picture.”
Compares the firm’s expenses against its
revenue over a period of time to show its
net income (or loss):

Net Income = Sales Revenue - Expenses

 The income statement represents the
profitability of a business over a period of
time.
44
45
Cash Flows Statement
 Statement of Cash Flows – shows the change in
the firm's working capital over a period of time
by listing the sources of funds and the uses of
these funds.

 The cash-flow statement exhibits sources and

uses of cash over a given period of time.

 The focus is on generating income and

honoring obligations (e.g., loans and debts). 46
 Capital Budgeting
 Budgeting for the acquisition of “capital
assets”
 Capital budgeting (or investment appraisal) is
the planning process used to determine
whether an organization's long term
investments such as new machinery,
replacement machinery, new plants, new
products, and research development projects
are worth pursuing.
Capital budgeting
 Some Capital budgeting techniques include
(a) Payback period
(b) Internal Rate of Return
(c) Net Present Value
(d) Accounting Rate of Return
(e) Profitability Index

48
Payback Period

“Time period required to recover the cost of the

investment from the annual cash inflow produced
by the investment.”
It refers to the period of time required for the
return on an investment to "repay" the sum of the
original investment.

Amount invested
Expected annual net cash inflow
 Example
A company is considering an investment of $130,000
in new equipment. The new equipment is expected
to last 10 years. It will have zero salvage value at the
end of its useful life. The straight-line method of
depreciation is used for accounting purposes. The
expected annual revenues and costs of the new
product that will be produced from the investment
are:
Sales $200,000
Cost of goods sold $145,000
Depreciation expense 13,000
Selling & Admin expense 22,000 180,000
Income before income tax $20,000
Income tax expense 7,000
Net Income $13,000
 Computation of Annual Cash
Inflow
Expected annual net cash inflow =
Net income $13,000
Depreciation expense 13,000
$26,000

Cash Payback Period

$130,000 / $26,000 = 5 years
 Payback Period –
Uneven Cash Flows
Cumulative
One company wants Annual Net Net Cash
Year Cash Flows Flows
to install a machine
0 $ (16,000) $ (16,000)
that costs $16,000
1 3,000 (13,000)
and has an 8-year
2 4,000 (9,000)
useful life with zero 3 4,000 (5,000)
salvage value. 4 4,000 (1,000)
Annual net cash 5 5,000
flows are: 6 3,000
7 2,000
8 2,000
 Payback Period –
Uneven Cash Flows
Cumulative
We recover the $16,000 Annual Net Net Cash
purchase price between Year Cash Flows Flows
years 4 and 5, about 0 $ (16,000) $ (16,000)
4.2 years for the 1 3,000 (13,000)
payback period. 2 4,000 (9,000)
3 4,000 (5,000)
4 4,000 (1,000)
4.2
5 5,000
6 3,000
7 2,000
8 2,000
 Payback = 5 years
Using the Payback Period
Payback = 3 years
Consider two projects, each with a 5-year life
and each costing $6,000.
Project One Project Two
Net Cash Net Cash
Year Inflows Inflows
1 $ 2,000 $ 1,000
2 2,000 1,000
3 2,000 1,000
4 2,000 1,000
5 2,000 1,000,000

Would you invest in Project One just because it has

a shorter payback period?
 Cont’d
Case 1:When cash inflows are even:
R is the net cash inflow expected to be received
each period;
i is the required rate of return per period;
n are the number of periods during which the
project is expected to operate and generate cash
inflows.

55
Cont’d
Case 2: When cash inflows are uneven:

i is the target rate of return per period;

R1 is the net cash inflow during the first period;
R2 is the net cash inflow during the second period;
R3 is the net cash inflow during the third period,
and so on .

56
Cont’d

NB: Accept the project only if its NPV is

positive or zero. Reject the project having
negative NPV. While comparing two or more
exclusive projects having positive NPVs, accept
the one with highest NPV.

57
 Cont’d
 Example 1: Even Cash Inflows: Calculate the

net present value of a project which requires

an initial investment of $243,000 and it is
expected to generate a cash inflow of $50,000
each month for 12 months. Assume that the
salvage value of the project is zero. The target
rate of return is 12% per annum.

58
Solution
We have,
Initial Investment = $243,000
Net Cash Inflow per Period = $50,000
Number of Periods = 12
Discount Rate per Period = 12% ÷ 12 = 1%
 Net Present Value
= $50,000 × (1 − (1 + 1%)^-12) ÷ 1% − $243,000
= $50,000 × (1 − 1.01^-12) ÷ 0.01 − $243,000
≈ $50,000 × (1 − 0.887449) ÷ 0.01 − $243,000
≈ $50,000 × 0.112551 ÷ 0.01 − $243,000
≈ $50,000 × 11.2551 − $243,000
≈ $562,754 − $243,000
≈ $319,754 59
Cont’d
Example 2: Uneven Cash Inflows: An initial
investment on plant and machinery of $8,320
thousand is expected to generate cash inflows
of $3,411 thousand, $4,070 thousand, $5,824
thousand and $2,065 thousand at the end of
first, second, third and fourth year respectively.
At the end of the fourth year, the machinery
will be sold for $900 thousand. Calculate the
present value of the investment if the discount
rate is 18%. Round your answer to nearest
thousand dollars.

60
Cont’d
PV Factors:
Year 1 = 1 ÷ (1 + 18%)^1 ≈ 0.8475
Year 2 = 1 ÷ (1 + 18%)^2 ≈ 0.7182
Year 3 = 1 ÷ (1 + 18%)^3 ≈ 0.6086
Year 4 = 1 ÷ (1 + 18%)^4 ≈ 0.5158
The rest of the problem can be solved more efficiently in table
format as show below:
Year 1 2 3 4
Net Cash Inflow $3,411 $4,070 $5,824 $2,065
Salvage Value 900
Total Cash Inflow $3,411 $4,070 $5,824 $2,965
× Present Value
0.8475 0.7182 0.6086 0.5158
Factor
Present Value of
$2,890.68 $2,923.01 $3,544.67 $1,529.31
Cash Flows
Total PV of Cash
$10,888
Inflows
− Initial Investment − 8,320
61
Net Present Value $2,568 thousand
2. Internal Rate of Return (IRR)
 IRR is the rate of return at which the

discounted present value of receipts and

expenditures are equal

 Interest yield of the potential investment

 The interest rate that will cause the present

value of the proposed capital expenditure to
equal the present value of the expected
annual cash inflows.
IRR
 Internal rates of return are commonly used to
evaluate the desirability of investments or
projects.

 The higher a project's internal rate of return,

the more desirable it is to undertake the

project.

 Assuming all projects require the same

amount of up-front investment, the project
63

with the highest IRR would be considered the

 Example
 Two project investments may be given by the
sequence of cash flows

64
Solution

65
Capital budgeting techniques
(a) Payback period
(b) Internal Rate of Return
(c) Net Present Value
(d) Accounting Rate of Return
(e) Profitability Index
Others… (Reading Assignment) 66
 Comparing Methods
Payback Accounting Net present Internal rate
period rate of return value of return
Basis of Cash Accrual Cash flow s Cash flow s
measurement flow s income Profitability Profitability
Measure Number Percent Dollar Percent
expressed as of years Amount
Easy to Easy to Considers time Considers time
Understand Understand value of money value of money

Strengths Allow s Allow s Accommodates Allow s

comparison comparison different risk comparisons
across projects across projects levels over of dissimilar
a project's life projects
Doesn't Doesn't Difficult to Doesn't reflect
consider time consider time compare varying risk
value of money value of money dissimilar levels over the
Limitations projects project's life

Doesn't Doesn't give

consider cash annual rates
flow s after over the life
payback period of a project
 Breakeven Analysis
 The breakeven point is the level of operation
at which a business neither earns a profit nor
incurs a loss.

 It is a useful planning tool because it shows

entrepreneurs minimum level of activity
required to stay in business.

 With one change in the breakeven

calculation, an entrepreneur can also
68

determine the sales volume required to reach

Calculating the Breakeven Point
Step 1. Determine the expenses the business can
expect to incur.
Step 2. Categorize the expenses in step 1 into fixed
expenses and variable expenses.
Step 3. Calculate the ratio of variable expenses to net
sales. Then compute the contribution margin:

Contribution Margin = 1 - Variable Expenses

Net Sales Estimate
Step 4. Compute the breakeven point:
Total Fixed Costs
Breakeven Point $ = Contribution Margin 69
Example: Calculating the Breakeven Point
Step 1. Net Sales estimate is $950,000 with Cost of
Goods Sold.
Step 2. Variable Expenses of $705,125; Fixed
Expenses of $177,375.
Step 3. Contribution margin:

$705,125
Contribution Margin = 1 - = 0.26
$950,000
Step 4. Breakeven point:
$177,375
Breakeven Point $ = = $ 682,212
0.26
70
 Breakeven Chart
Revenue
Breakeven Point Line
Total Expense
Sales = $682,212
Line
$682,212

Fixed Expense
Line

0 $682,212
Sales Volume
71
 Ratio Analysis
 A method of expressing the relationships
between any two elements on financial
statements.
 Important barometers of a company’s
financial position.
 Study: Only 27 percent of small business
owners compute financial ratios and use them
to manage their businesses.
 Interpreting Ratios
 Ratios – useful yardsticks of comparison.
 Standards vary from one industry to another;
key is to watch for “red flags.”
 Critical numbers – measure key financial and
operational aspects of a company’s
performance. Examples:
 Sales per labor hour at a supermarket
 Food costs as a percentage of sales at a
restaurant
 Load factor (percentage of seats filled with
passengers) at an airline
 Putting Your Ratios to the Test
When comparing your company’s ratios to your industry’s
standards, ask the following questions:
1. Is there a significant difference in my company’s ratio and the
industry average?
2. If so, is this a meaningful difference?
3. Is the difference good or bad?
4. What are the possible causes of this difference? What is the
most likely cause?
5. Does this cause require that I take action?
6. If so, what action should I take to correct the problem?
Source: Adapted from George M. Dawson, “Divided We Stand,” Business Start-Ups, May 2000, p. 34.

74
 Twelve Key Ratios
Liquidity Ratio Current Ratio
Quick Ratio
Leverage Ratio Debt Ratio
Debt to Net Worth Ratio
Times Interest Earned Ratio
Operating Ratio Average Inventory Turnover Ratio
Average Collection Period Ratio
Average Payable Period Ratio
Net Sales to Total Asset Ratio
Profitability Net Profit on Sales Ratio
Ratio
Net Profit to Asset (Return on Asset) Ratio
75
Net Profit to Equity Ratio
Twelve Key Ratios
Liquidity Ratios - Tell whether or not a small business will
be able to meet its maturing obligations as they come due.
1. Current Ratio - Measures solvency by showing the firm's
ability to pay current liabilities out of current assets.
Current Ratio = Current Assets = $686,985 = 1.87:1
Current Liabilities $367,850

Industry Median
Current ratio = 1.50:1

The company’s current ratio is above the industry

median by a significant amount. The company should
have no problem meeting short-term debts as they
come due.
76
2. Quick Ratio - Shows the extent to which a firm’s
most liquid assets cover its current liabilities.
Quick Ratio = Quick Assets = $231,530 = 0.63:1
Current Liabilities $367,850

Industry Median
Quick ratio = 0.50:1

Again, the company passes this test of liquidity

when measured against industry standards. It
relies on selling (eg inventory) to satisfy short-
term debt.

77
 Leverage Ratios - Measure the financing provided by the
firm's owners against that supplied by its creditors; a gauge
of the depth of the company's debt.
 Careful!! Debt is a powerful tool, but, like dynamite, you must
handle it carefully!
3. Debt Ratio - Measures the percentage of total assets
financed by creditors rather than owners.
Debt Ratio = Total Debt = $580,000 = 0.68:1
Total Assets $847,655
Industry Median
Debt ratio = 0.64:1
Creditors provide 68 percent of company’s total assets, very
close to the industry median of 64 percent. Although the
company doesn't appear to be overburdened with debt, it
might have difficulty borrowing, especially from
conservative lenders. 78
4. Debt to Net Worth Ratio - Compares what a
business “owes” to “what it is worth.”
Debt to Net = Total Debt = $580,000 = 2.20:1
Worth Ratio Tangible Net Worth $264,155

Industry Median
Debt to net worth ratio = 1.90:1
It owes $2.20 to creditors for every $1.00 the owner has
invested in the business (compared to $1.90 to every $1.00
in equity for the typical business. Many lenders will see the
company as “borrowed up,” having reached its borrowing
capacity. Creditor’s claims are more than twice those of the
owners. 79
5. Times Interest Earned - Measures the firm's ability
to make the interest payments on its debt.
Times Interest = EBIT* = $100,479 = 2.52:1
Earned Total Interest Expense $39,850
*Earnings Before Interest and Taxes

Industry Median
Times interest earned ratio = 2:1
It’s earnings are high enough to cover the interest
payments on its debt by a factor of 2.52:1, slightly
better than the typical firm in the industry. The
company has a cushion (although a small one) in
meeting its interest payments.
80
 Operating Ratios - Evaluate a firm’s overall
performance and show how effectively it is putting
its resources to work.
6. Average Inventory Turnover Ratio - Tells the
average number of times a firm's inventory is
“turned over” or sold out during the accounting
period.
Average Inventory = Cost of Goods Sold = $1,290,117 = 2.05 a year
Turnover Ratio Average Inventory* $630,600
Industry Median
Average inventory turnover ratio = 4.0 times per year

Inventory is moving through the company at a very slow

pace. 81
7. Average Collection Period Ratio (days sales
outstanding, DSO) - Tells the average number of
days required to collect accounts receivable.
Two Steps:
Receivables Turnover = Credit Sales = $1,309,589 = 7.31 times
Accounts Receivable $179,225 a year

Average Collection = Days in Accounting Period = 365 = 50.0 Period Ratio

Receivables Turnover Ratio 7.31 days

Industry Median
Average collection period ratio = 19.3 days

The company collects the average account receivable after 50

days compared to the industry median of 19 days - more than
2.5 times longer. 82
 8. Average Payable Period Ratio - Tells the average number of days
required to pay accounts payable.
Two Steps:
Payables Turnover= Purchases = $939,827 = 6.16 times
Ratio Accounts Payable $152,580 a year
Average Payable = Days in Accounting Period = 365 = 59.3
Period Ratio Payables Turnover Ratio 6.16 days

Industry Median
Average payable period ratio = 43 days
The company payables are nearly 40 percent slower than
those of the typical firm in the industry. Stretching
payables too far could seriously damage the company’s
credit rating.
83
9. Net Sales to Total Assets Ratio - Measures a firm’s
ability to generate sales given its asset base.

Net Sales to = Net Sales = $1,870,841 = 2.21:1

Total Assets Total Assets $847,655

Industry Median
Net Sales to total assets ratio = 2.7:1

The company is not generating enough sales, given the

size of its asset base.

84
 Profitability Ratios - Measure how efficiently a firm
is operating; offer information about a firm’s
“bottom line.”
10. Net Profit on Sales Ratio - Measures a firm’s
profit per dollar of sales revenue.
Net Profit on = Net Income = $60,629 = 3.24%
Sales Net Sales $1,870,841
Industry Median
Net profit on sales ratio = 7.6%
After deducting all expenses, the company has just 3.24
cents of every sales dollar left as profit - less than half the
industry average. It may discover that some of its
operating expenses are out of balance.
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11. Net Profit to Assets (Return on Assets) Ratio –
tells how much profit a company generates for each
dollar of assets that it owns.

Net Profit to = Net Income = $60,629 = 7.15%

Assets Total Assets $847,655

Industry Median
Net profit to assets ratio = 5%

It generates a return of 7.15 percent for every $1 in

assets, which is 30 percent above the industry
average. Given its asset base, the company is
squeezing an above-average return out of company.
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 12. Net Profit to Equity Ratio - Measures an
owner's rate of return on the investment (ROI) in
the business.
Net Profit to = Net Income = $60,629 = 22.65%
Equity Owner’s Equity* $267,655
* Also called net worth

Industry Median
Net profit on equity ratio = 12.6%
The company return on its investment in the
business is an impressive 22.65 percent, compared to
an industry median of just 12.6 percent.

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END

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