Return On Sales - ROS

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DEFINITION of 'Return On Sales - ROS'

A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". It is calculated using this formula:

 

Return On Sales (ROS)

BREAKING DOWN 'Return On Sales - ROS'

This measure is helpful to management, providing insight into how much profit is being produced per dollar of sales. As with many ratios, it is best to compare a company's ROS over time to look for trends, and compare it to other companies in the industry. An increasing ROS indicates the company is growing more efficient, while a decreasing ROS could signal looming financial troubles.

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RELATED FAQS
  1. Which contra accounts are the best for indicating profitability in a company?

    The best contra accounts to indicate profitability in a company are contra asset accounts, the contra liability accounts ... Read Full Answer >>
  2. Is return on sales the best metric for profitability?

    While return on sales, or ROS, is an important evaluation metric used by investors and analysts, it is not generally considered ... Read Full Answer >>
  3. What is the best timeframe to use when evaluating return on sales (ROS)?

    The return on sales, or ROS, ratio is best viewed on a year-to-year basis and examined for trends over a period of time. ... Read Full Answer >>
  4. Is return on sales (ROS) the same as return on equity?

    Return on sales (ROS) and return on equity (ROE) measure two very different kinds of financial performance. Businesses and ... Read Full Answer >>
  5. What is the difference between operating margin and return on sales?

    Typically, the only differences between a company's operating margin and its return on sales, or ROS, come down to semantics ... Read Full Answer >>
  6. How do I calculate the inventory turnover ratio?

    Managing inventory levels is important for most businesses and this is especially true for retailers and any company that ... Read Full Answer >>
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