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 FAQS
  1. What is the difference between degree of operating leverage and degree of financial ...

    The degree of operating leverage and the degree of financial leverage are two indicators used in fundamental analysis to ... Read Full Answer >>
  2. Why would you use the TTM (trailing twelve months) rather than the data from the ...

    Public companies report their yearly financial statements along with an annual report. However, financial professionals are ... Read Full Answer >>
  3. Why is it important for an investor to understand business accounting?

    Investors use financial statements to obtain valuable information used in valuation and credit analysis of companies. Therefore, ... Read Full Answer >>
  4. Why does the efficient market hypothesis state that technical analysis is bunk?

    The efficient market hypothesis (EMH) suggests that markets are informationally efficient. This means that historical prices ... Read Full Answer >>
  5. What are the business consequences of using FIFO vs. LIFO accounting methods?

    If a company uses a first-in, first-out accounting method (FIFO), it's likely that its reported earnings will be higher than ... Read Full Answer >>
  6. How do you use a financial calculator to determine present value?

    Determining the present value of a given cash flow is based on the concept that money today is inherently worth more than ... Read Full Answer >>
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. Investing

    Why International Diversification Matters Today

    Given the breadth and diversity of the U.S. economy and market, many U.S. investors feel comfortable keeping their money within U.S. borders.
  7. Economics

    Explaining the EBITDA Margin

    EBITDA margin can provide an investor with a cleaner view of a company's core profitability.
  8. Economics

    The U.S. Economy May Be Stronger Than You Think

    While the economic performance in the U.S. broadly disappointed in the first quarter, temporary factors presented one-off events that depressed output.
  9. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  10. Economics

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.

You May Also Like

Hot Definitions
  1. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
  2. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  3. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  4. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  5. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  6. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
Trading Center