1. What is Return on Sales (ROS)?

Return on Sales (ROS) is a financial ratio that measures how efficiently a company turns sales into profits. It shows what percentage of each dollar of sales revenue is actual profit after accounting for operating expenses.

2. How Does the Calculator Work?

The calculator uses the ROS formula:

Where:

• \( \text{Operating Profit} \) — Earnings before interest and taxes (EBIT)
• \( \text{Sales Revenue} \) — Total revenue from sales

Explanation: The ratio indicates how much profit is generated per dollar of sales. Higher values indicate better profitability.

3. Importance of ROS Calculation

Details: ROS is a key profitability metric that helps investors and managers assess a company's operational efficiency and compare performance across companies or industries.

4. Using the Calculator

Tips: Enter operating profit and sales revenue in USD. Both values must be valid (positive numbers, revenue cannot be zero).

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROS value?
A: This varies by industry, but generally 5-10% is good, 15-20% is excellent, and above 20% is outstanding.

Q2: How does ROS differ from profit margin?
A: ROS focuses on operating profit (before interest and taxes), while net profit margin considers all expenses including taxes and interest.

Q3: Why might ROS decrease?
A: Decreases could indicate rising costs, pricing pressure, or operational inefficiencies.

Q4: How often should ROS be calculated?
A: Typically calculated quarterly with financial statements, but can be monitored monthly for internal purposes.

Q5: Can ROS be negative?
A: Yes, negative ROS means operating expenses exceed revenue, indicating the company is losing money on operations.