Return On Revenue - ROR

AAA

DEFINITION of 'Return On Revenue - ROR'

A measure of a corporation's profitability that compares net income to revenue. Return on revenue is calculated by dividing net income by revenue.

Return on Revenue = Net Income / Revenue

Net income (NI) is calculated by taking revenues and subtracting the costs of conducting business in addition to interest, taxes paid and depreciation.

Revenue is the amount of money that a company receives as a result of performing business activities during a specific period, including discounts and deductions for returned merchandise. Intrinsically, the difference between net income and revenue is expenses, such that an increasing ROR implies less expense for higher net income.

INVESTOPEDIA EXPLAINS 'Return On Revenue - ROR'

A corporation's return on revenue is useful in comparing profitability from year to year and evaluating its profitability performance, by comparing the net income and the revenue. When ROR decreases, it may indicate that expenses are rising. Conversely, when ROR increases, it may provide an indication that expenses are being handled efficiently. By reviewing ROR and changes to ROR values over time, a company's management can implement expense control measures where necessary.

Since return on revenue does not take into consideration a company's assets and liabilities, it should be used in conjunction with other metrics when evaluating a company's financial performance and position.

RELATED TERMS
  1. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders ...
  2. Return On Assets - ROA

    An indicator of how profitable a company is relative to its total ...
  3. Revenue

    The amount of money that a company actually receives during a ...
  4. Net Income - NI

    1. A company's total earnings (or profit). Net income is calculated ...
  5. Expense

    1. The economic costs that a business incurs through its operations ...
  6. Stockholders' Equity

    The portion of the balance sheet that represents the capital ...
Related Articles
  1. Fundamental Analysis

    Ratio Analysis Tutorial

    If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios.
  2. Bonds & Fixed Income

    Achieving Better Returns In Your Portfolio

    We look at three risk factors that best explain the bulk of equity performance.
  3. Retirement

    Projected Returns: Honing The Craft

    Find out how to forecast long-term returns on the three major asset classes.
  4. Investing Basics

    Misconceptions About Past Performance And Future Returns

    Relying on an investment's past performance to guide your investment decisions is a losing strategy. Find out why.
  5. Forex Education

    6 Basic Financial Ratios And What They Reveal

    These formulas can help you pick better stocks for your portfolio once you learn how to use them.
  6. Charts & Patterns

    Why These Could Be 2015's 10 Best Biotech Stocks

    A quick look at a 10 biotech companies that are poised to deliver for shareholders in 2015.
  7. Mutual Funds & ETFs

    How To Build A Bond Ladder?

    Bond laddering is a strategy used when building a portfolio: an investor can spread out interest rate risk and create a stream of cash flows for income.
  8. Charts & Patterns

    Why These Could Be 2015's 10-Best Media Stocks

    A list of top-tier and speculative media stocks for 2015.
  9. Investing

    Why Is The Nasdaq 5,000 Different This Time?

    The Nasdaq this week has slipped below the 5,000 high-water mark it reached last week. The last time it hit above 5,000 was in March 2000.
  10. Charts & Patterns

    Why These Could Be 2015's 10-Best Pharma Stocks

    The pharmaceutical stocks covered here have significant potential going forward. Here's why.

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center