267 Section 10.2 Price Copyright Goodheart-Willcox Co., Inc. Maximize Profits Maximizing profit per sale is a pricing objective that revolves around fewer sales, but with increased profit margins. A business charges the highest price a customer will pay before deciding that the price exceeds the value. The high-end jewelry industry is an example of where maximizing profit per sale is used as a pricing objective. Increase Market Share Market share is the percentage of the total sales in a given market that one business conducts. All of the competing businesses account for 100 percent of the market. Market share is determined by dividing one company’s total revenue by the total revenue of the market. For example, four advertising agencies in a town have combined revenue of $4 million. If one of the agency’s revenue is $2 million, that agency has a 50 percent market share. The goal of increasing market share is to gain additional customers, which often means taking customers from competitors. It can also mean attracting new customers into the market. Maximize Return on Sales Return on sales (ROS) is a measure of a company’s profitability and is equal to the net income divided by total sales. ROS reflects how well a company has controlled costs. For example, if a business has a net income of $10,000 from sales of $20,000, the ROS is 50 percent. net income = ROS total sales $10,000 = 50 percent $20,000 Improve Return on Investment Return on investment (ROI) is a common measure of profitability for a business. It is based on the amount earned from the investment in the business. One way of determining ROI is to divide net profit by total assets. For example, if a business has a net profit of $50,000 and assets of $150,000, the ROI is 33 percent. net profit = ROI total assets $50,000 = 33 percent $150,000