Calculator: Return On Sales (ROS)
Published Date
Return on Sales (ROS)
Return on Sales (ROS) is a financial metric that measures the efficiency of a company in generating profit from its revenue. It indicates how much Profit (Net Income) is produced per dollar of Sales, reflecting the company's operational performance.
A higher ROS indicates that a company is more effective at converting sales into actual profit, reflecting strong operational performance. Conversely, a lower ROS may suggest inefficiencies in managing expenses relative to revenue.
However, in some contexts, Operating Profit (Operating Income or EBIT) is used in the calculation of ROS to assess a company's operational efficiency, excluding non-operating factors like taxes and interest. This version of ROS is often referred to as Operating Profit Margin.
Instructions
1. Select a Company for analysis (your company, a customer, a competitor, or a company you are considering investing in).
2. Gather the data for several years (or you can compare 2 or 3 companies).
Use the Visual Finance App OR locate an annual report for the company and open the Income Statement,
The annual report will show financial data for the reporting year and 1 or 2 years previous. Remember it may have a different name:
- Statement of Earnings
- Profit and Loss Statement (P&L)
- Statement of Profit and Loss
- Statement of Operations
- Statement of Comprehensive Income
3. Look at the Return on Sales for each year.
You can also view ROS ratios with the Visual Finance App.
See also
Continue the Learning: Return on Sales