Return On Sales - ROS

A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". It is calculated using this formula:

Investopedia Says:
This measure is helpful to management, providing insight 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 to other companies in the industry. An increasing ROS indicates the company is growing more efficient, while a decreasing ROS could signal looming financial troubles.

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We look at a retailer's inventory turnaround times, its receivables as well as its collection period. Measuring Company Efficiency

Net pretax profits as a percentage of Net Sales-a useful measure of overall operational efficiency when compared with prior periods or with other companies in the same line of business. It is important to recognize, however, that return on sales varies widely from industry to industry. A supermarket chain with a 2% return on sales might be operating efficiently, for example, because it depends on high volume to generate an acceptable Return on Invested Capital. In contrast, a manufacturing enterprise is expected to average 4% to 5%, so a return on sales of 2% is likely to be considered highly inefficient.