Business Administration 1220E Chapter Notes - Chapter 1: Gross Margin, Gross Income, Profit Margin

• School: Western University
• Department: Business Administration
• Course: Business Administration 1220E
• Professor: Barbara Bruce

Document Summary

Margin (dividing anything by the net income (net income goes @ bottom) *when possible, the ratios are calculated over three years. *main goal of a business= to earn a return on investment while maintaining a stable financial position. Insolvency: when a firm is unable to meet its current obligations (b. s) Financial position: the quality of a firm"s balance sheet. Sound financial position: when business is able to pay its debt when it"s due. Fixed-cost item: a ratio to net sales, will automatically . Volume rises = ratio will automatically decline. Companies in industries where products are mostly commodities (products easily replicated by other firms) will usually have low margins (food, natural gas,e tc. ) Net income on i. s shows how successful a firm has been (positive = more revenue has been generated than expenses) (management performance) Shows how increases/decreases in expenses affect the profitability. Return on capital invested in business (fixed assets: cogs margin.