Return On Revenue - ROR


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.

BREAKING DOWN '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.

  1. Revenue

    The amount of money that a company actually receives during a ...
  2. Return On Equity - ROE

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

    An indicator of how profitable a company is relative to its total ...
  4. Stockholders' Equity

    The portion of the balance sheet that represents the capital ...
  5. Net Income - NI

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

    1. The economic costs that a business incurs through its operations ...
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