Return on sales
Return on sales, also called operating margin, expresses operating profit as a percentage of revenue. It shows how much of each euro of sales a business keeps as operating profit, and is one lever in DuPont analysis.
Also known asROS · operating margin
What it is
See it move
A split bar shows total revenue of €2,000,000 divided into two segments: operating profit of €320,000 and all other costs totalling €1,680,000. A note at the base states ROS = €320k ÷ €2m = 16%, showing that the business retains 16 cents of operating profit from every euro of sales after deducting all operating costs.
The formula
Variables
- Return on sales (operating margin) (decimal (or %))
- Operating profit (€)
- Revenue (€)
Check yourself
Olvera Retail SA earns operating profit of €300,000 on revenue of €2,000,000. A rival, Marta Brands, earns €420,000 operating profit on revenue of €3,000,000. Which company has the higher return on sales?