Final answer:
Sheri is evaluating her financial statements to determine profitability by using a common financial metric known as the profit margin ratio.
Step-by-step explanation:
Sheri is calculating the profit margin ratio by dividing net income after taxes by net sales to determine her company's profitability. This metric reflects the percentage of net sales that is net income.
This ratio is obtained by dividing the net income after taxes by net sales, and it expresses the percentage of revenue that exceeds the costs of production, including taxes, signifying the efficiency with which a company is run.
To understand profitability better, one must also comprehend that total revenue is calculated by multiplying the price of the product with the quantity sold, and net income is derived from subtracting total costs from total revenue.