1. What is Return on Sales (ROS)?

Return on Sales (ROS) is a financial ratio that measures how efficiently a company turns sales into profits. It shows the percentage of sales that has turned into profit.

2. How Does the Calculator Work?

The calculator uses the ROS formula:

Where:

• \( EBIT \) — Earnings Before Interest and Taxes (USD)
• \( Sales \) — Total revenue from sales (USD)

Explanation: The ratio indicates what percentage of each dollar of sales is retained as earnings after accounting for operating expenses.

3. Importance of ROS Calculation

Details: ROS is a key indicator of operational efficiency and profitability. It helps compare performance across companies and industries, and track performance over time.

4. Using the Calculator

Tips: Enter EBIT and Sales in USD. Both values must be positive, with Sales greater than zero for valid calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROS value?
A: This varies by industry, but generally 5-10% is considered good, while 15-20% is excellent.

Q2: How does ROS differ from profit margin?
A: ROS uses EBIT (operating profit), while net profit margin uses net income after all expenses.

Q3: Can ROS be negative?
A: Yes, negative ROS indicates the company is losing money on its operations.

Q4: Why use EBIT instead of net income?
A: EBIT focuses on operational efficiency by excluding financing and tax effects.

Q5: How often should ROS be calculated?
A: Typically calculated quarterly with financial statements, but can be done monthly for internal tracking.