Definition – What is Return on Sales?
Return on Sales is a ratio of operating profit to sales. It is listed as a percentage.
Formula – How to calculate Return on Sales
Return on Sales = (Operating Profit / Net Sales) x 100%
A business has operating profit of $7,000 and net sales of $14,000.
Return on Sales = ($7,000 / $14,000) x 100% = 0.500 x 100% = 50.00%
Therefore, this company has a return on sales of 50.00%
Sources and more resources
- Wikipedia – Operating Margin – Wikipedia’s entry on operating margin, also known as return on sales. Includes the formula as well as an explanation.
- Accounting Tools – Return on sales – An explanation of return on sales. Includes the formula and an example calculation.
- Investopedia – Return on Sales – A summary and break down of the concept of return on sales.