Return on Sales Calculator
Wondering how efficient your sales are? Our free Return on Sales (ROS) Calculator reveals your net profit percentage from revenue—instantly!
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About Return on Sales and Calculation
An important metric in detail is that it is returned on sale, and we will also see how to calculate it. So in every business, its main purpose is to make sales and earn profits for the organization. So the return on sales is an important metric to understand the operational efficiency of the organisation. What is a return-on-sale? Return on sales is the ratio between operating profit and net sales. It defines how efficiently the company can generate operating profit from its revenue. So this is the definition of a return on sale. Now that I understand the formula to calculate the return on sale, the return on sale is obtained by dividing the operating profit by net sales. Profit is incurred in the business operation before interest and tax are added. And then net sales are the total income made by the company by selling products and services to customers. So, return on sale is also not an operating profit margin. If we can say that companies are not doing business to recover the investment, then that business is undergoing a loss.
Consider that the company has total operating expenses of $300,000. And the company is making sales of $500,000. Now the operating profit of the company will be net sales minus operating expenses, which is $500,0000-$300,000. Operating profit is $200,000. So to calculate the return on sales, we need operating profit and net sales. In this example, the operating profit is $200,000, as we have calculated, and the net sales are $500,000. The return on sales will be the operating profit divided by the net sales. $200,000 divided by $500,000 is equal to 0.4. We have to multiply 0.4 by 100 so that it will be 40%. So in this example, the return on sales is 40%.
Return on Sales calculation formula
Return on Sales (ROS). The formula for Return on Sales is
| Return on Sales (ROS) = ( |
| ) ×100 |
Return on Sales Calculation Example
Example: 1. A retail store wants to measure its profitability after a quarter.
Revenue (Total Sales): $500,000
Net Profit (After Expenses): $75,000
| Return on Sales (ROS) = ( |
| ) ×100 = 15% |
The store earns 15% profit on every dollar of sales.
Higher ROS = Better cost control & pricing efficiency.
Example 2. Here's a step-by-step example calculation -
Cloth store Financial Information -
Operating Income: $ 40,000
Revenue (Sales): $ 200,000
Numbers into the Formula
| Return on Sales (ROS) = ( |
| ) ×100 |
Perform the Calculation
| Return on Sales (ROS) = ( |
| ) ×100 = 20% |
Interpret the Result
The resulting Return on Sales (ROS) is 20%.