Peak Performance Sporting Goods Company Has Collected the Following Information

question 102

Multiple Choice

Peak Performance Sporting Goods Company has collected the following information about itself and its competitors: Which of the following statements explains the importance of this information?

• A)Return on Sales is an indication of how well Peak Performance is competing with others in the industry in generating income from sales.
• B)Although this information is important to Peak Performance, it is an internal calculation. Investors will not compare Peak Performance's return on sales with others. There are too many other variables such as higher expenses, which may prevent Peak Performance from maintaining the lowest measure.
• C)Unlike other measurements, a firm hopes that its Return on Sales is the lowest in the industry, thus, Peak Performance is neither doing the best nor doing the worst in its industry.
• D)As a profitability measurement, return on sales is not as important to the CFO as earnings per share, because this calculation does not show a dilution of ownership.

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Definitions:

Dividends

Disbursements issued by a company to its shareholders, representing a share of the company's earnings distributed to its stockholders.

Cash Dividend

A cash dividend refers to the distribution of a portion of a company's profits to its shareholders as cash.

Common Stock

Equity shares that represent ownership in a corporation, giving shareholders voting rights and a share in the company's profits through dividends.

Journalize

The act of recording financial transactions in a company's ledger.