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. Expense

    1. The economic costs that a business incurs through its operations ...
  3. Net Income - NI

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

    The amount of money that a company actually receives during a ...
  5. Stockholders' Equity

    The portion of the balance sheet that represents the capital ...
  6. Return On Assets - ROA

    An indicator of how profitable a company is relative to its total ...
Related Articles
  1. Fundamental Analysis

    Ratio Analysis Tutorial

  2. Bonds & Fixed Income

    Achieving Better Returns In Your Portfolio

  3. Retirement

    Projected Returns: Honing The Craft

  4. Investing Basics

    Misconceptions About Past Performance ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center