Return on Sales (ROS) is a financial ratio that measures a company’s efficiency in generating profits from its revenue. It is calculated by dividing the operating profit (or income) by the net sales. A higher ROS indicates greater profitability and better control over costs.
In this tutorial, I’ll show you how to calculate ROS in Excel with a simple formula. All you need are two inputs: operating profit and net sales. Alternatively, you can use EBIT (earnings before interest and taxes) as a proxy for operating profit and revenue for net sales.
To calculate ROS in Excel, follow these steps:
- Enter the operating profit (or EBIT) in cell A1 and the net sales (or revenue) in cell B1.
- In cell C1, enter the formula =A1/B1 to calculate the ROS.
- Format cell C1 as a percentage.
- You can also label the cells by entering “Operating Profit” in cell A2, “Net Sales” in cell B2, and “ROS” in cell C2.
In this example, the ROS is 13%, indicating that for every dollar of net sales, the company generates 13 cents in operating profit.
You have now calculated the ROS in Excel. You can use this formula to compare the profitability of different companies or different periods of time. However, keep in mind that ROS is only one aspect of financial performance and should not be used in isolation.
You should also consider other ratios such as ROE (return on equity), ROA (return on assets), and ROI (return on investment) to get a more comprehensive picture of a company’s profitability.
