Return on Sales (ROS) Calculator
Evaluate your company's operational efficiency and profitability.
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Table of Contents
ROS Formula
Return on Sales (ROS) is a financial metric that measures a company's operational efficiency and profitability. It shows how much profit a company generates from its sales revenue.
How to Calculate ROS
To calculate ROS, follow these steps:
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1Determine the net income from your income statement
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2Find the net sales revenue from your income statement
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3Divide net income by net sales
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4Multiply by 100 to get the percentage
Interpreting ROS
ROS is a key metric for evaluating a company's operational efficiency and profitability. Here's how to interpret different ROS values:
- ROS > 20%: Excellent performance, indicating strong operational efficiency and profitability.
- ROS 10-20%: Good performance, showing effective operational management and profitability.
- ROS 5-10%: Average performance, suggesting room for improvement in operational efficiency.
- ROS < 5%: Below average performance, indicating potential issues with operational efficiency.
- Negative ROS: Poor performance, suggesting the company is not generating profit from sales.
ROS - Practical Examples
Example 1 High-Performing Company
A company with a net income of $150,000 and net sales of $500,000.
ROS = ($150,000 / $500,000) × 100% = 30%
Example 2 Average-Performing Company
A company with a net income of $75,000 and net sales of $1,000,000.
ROS = ($75,000 / $1,000,000) × 100% = 7.5%
Example 3 Struggling Company
A company with a net loss of $50,000 and net sales of $800,000.
ROS = (-$50,000 / $800,000) × 100% = -6.25%