Return on sales
A measurement of operational efficiency equalingnet pre-tax profits divided by net sales expressed as a percentage.
| return on sales The portion of each dollar of sales that a firm is able to turn into income. Because of severe competition, regulation, or other factors, some firms or industries have low returns on sales. This is generally the case for grocery chains, for example. In some instances, a low return on sales can be offset by increased sales. Return on sales varies significantly from industry to industry. Compare net profit margin, profitability ratio. |
Return on Sales
A company's earnings divided by the amount of sales, expressed as a percentage. This is a measure of how much the company is profiting from its sales. A high return on sales indicates that the company is selling its products well and its profits are likely sustainable; a low return on sales indicates the opposite. Management often uses the ROS to determine how efficient the company is.
Return on Sales (ROS)
What Does Return on Sales Mean?
A widely used ratio that is used to evaluate a company's operational efficiency; also known as operating profit margin. It is calculated by using this formula:
Investopedia explains Return on Sales
This measure provides management with insights into how much profit is being produced per dollar of sales. As with many ratios, it is best to compare a company's ROS over time to look for trends and compare it with that of other companies in the industry. When ROS is increasing, this indicates that the company is growing efficiently, whereas a decreasing ROS could signal looming financial troubles.
Related Terms:
• Asset Turnover
• Gross Margin
• Net Income—NI
• Profit Margin
• Revenue
How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content.
| ?Page tools | ||
|---|---|---|
|