Return On Sales Ratio Formula
It is the ratio of Operati ng Profit to Net Sales or i n other words when we divide Operating Profit by Net Sales, the n we get Return On Sales or Operating Profit Margin. It shows the efficiency of the Management in utilizing its resources to co n vert Reve n ues i n to profit from business’s operations. It is expressed in percentage like other ratios. It is a Financial Ratio which helps investors and other interested parties to invest in the business if this ratio is good as it is a good sign of company’s management efficiency to convert Revenues into profit from available resources. Return On Sales Ratio Formula Mathematically, we ca n write as follows: Return On Sales Ratio Formula = Operating Profit / Net Sales Example For Example, if Operati ng Profit is Rs. 100000 a nd N et Sales is Rs. 500000, then Return On Sales is calculated as shown below: = 100000 / 500000 = .2 X 100 = 20% Interpretation / Analysis ...