What is the return on sales?

Sometimes it is referred to as operating margins, operating profitable range or margin of operating income, the return on sale is the level of generated net profit divided by overall sales over the same period of time. This calculation is considered necessary to understand the real image of what the type of financial gains achieved during the considered period, thus gaining a better understanding of the overall financial power of the company. The return on sales, or ROS, is presented as a percentage rather than a real number. One reason concerns the production process itself. If sales have fallen and profits are negatively affected, ROS can help identify factors that can cause loss, allowing the company to modify its operations to meet certain changes in the taste or consumer requirements. This can save companies money in more than one way to increase the bottom line.

inBy this operating profit margin monthly or even a quarterly base, it is possible to identify changes and modify the production earlier, thus preventing the accumulation of the finished goods that must be stored. Since the taxes must be regularly paid for supplies, the ability to maintain reserves of finished goods and stocks of raw materials, as low as possible in many companies is the main problem. From this point of view, the calculation of sales return can actually help reduce the total operating costs not only by preventing the purchase of unnecessary raw materials, but also to maintain lower tax debt.

For enterprises that are of seasonal nature, the determination of the return on sales that relates to the period in the operating year may be much easier to know when to adapt production to suit demand. This, in turn, makes IT more efficiently ordering materials, involve temporary employees during a period when it is necessary to increase the output and scalance back to materials and workforce when a slow season is going. Thus helps to maintainThe company is financially viable and able to function at the best level of profit for a longer period of time.

with companies that do not experience regular cycles of movements up and down when selling, calculating the return on sale is still important. This process can allow you to identify changes in factors, such as raw material costs, increase companies for the operation of production facilities, and any other factor that affects the company's profitability. The identification of these factors quickly allows you to solve and solve problems before they have a chance to drastically affect the profits generated by the company, and thus maintain or even increase profits from one month to the next.