Financial Terms Glossary

Return On Sales (ROS)

Formal

A simple measure of the net profitability of a business compared to the levels of turnover (sales income) generated in that business. This measures, as a percentage, how much of the profit or income from the sales activity is left for the business after the deduction of the running expenses. Eg Sales £100,000 Net Profit (earnings) £10,000 - 10% ROS.

Informal

Businesses generate income - (say) at a rate of 25% of the turnover or sales value. This is the gross margin percentage (25%) Further expenses for staff, premises and travelling may take another 15% of the sales value. That leaves a net profit or earnings level at 10% of the original sales value. This is the ROS percentage.

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