Gross profit and gross profit percentage are used to assess whether the profits will cover operating
expenses. The gross profit rate has remained steady in the periods since 1993. Southwest Airlines has a
relatively high gross profit rate, primarily because of low operating costs. Low operating costs is one of
Southwest Airlines’ claim to fame, as discussed in their 1997 Annual Report, “By keeping costs low, we
keep our fares low. This, in turn, gives customers the freedom to fly.”
Return on sales discloses the profits earned and measures the efficiency of the company. The return on
sales is above the industry average of 2.9%.6
Such a favorable comparison has proven to be the trend
for Southwest Airlines.
Return on stockholder’s equity assesses the effective use of resources provided by stockholders.7
This
measure of performance is one of the key profitability ratios. Although the return on equity has been
below the industry median, Southwest Airlines has had a significant increase since 1996.
Gross profit and gross profit percentage are used to assess whether the profits will cover operatingexpenses. The gross profit rate has remained steady in the periods since 1993. Southwest Airlines has arelatively high gross profit rate, primarily because of low operating costs. Low operating costs is one ofSouthwest Airlines’ claim to fame, as discussed in their 1997 Annual Report, “By keeping costs low, wekeep our fares low. This, in turn, gives customers the freedom to fly.”Return on sales discloses the profits earned and measures the efficiency of the company. The return onsales is above the industry average of 2.9%.6 Such a favorable comparison has proven to be the trendfor Southwest Airlines.Return on stockholder’s equity assesses the effective use of resources provided by stockholders.7 Thismeasure of performance is one of the key profitability ratios. Although the return on equity has beenbelow the industry median, Southwest Airlines has had a significant increase since 1996.
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