What is return on sales and formulas for calculating it. Return on sales based on net profit - formula Return on sales indicator under equal conditions

Financial analysis uses various tools to assess the sustainability of an enterprise’s position in the market and the effectiveness of management decisions.

The main one is profitability calculation, which analyze the relative profitability, which is calculated as a share of the costs of financial resources or property.

You can calculate profitability:

Sales;
Assets;
Production;
Capital.

The most striking indicator of a company's financial condition is return on sales.

The indicator value is used for:

Exercising control for the profit of the enterprise;
Control of profit or unprofitability of sales by product category;
Monitoring compliance with tactical goals strategic;
Comparisons of indicators with the industry average.

Return on Sales - Definition

Return on sales – This is a financial instrument that allows you to estimate how much profit is included in each ruble that the company receives as a percentage of gross revenue.

Profitability clearly demonstrates the share of profit in product revenue.

The calculation of profitability is distinguished:

by gross profit;
by profit on the balance sheet;
by operating profit;
by net profit.

How to calculate the profitability of sales on the balance sheet?

Using balance sheet data and Form 2 (financial results), you can easily calculate the return on sales indicator.

RP=profit (loss) from sales/commodity revenue indicator

RP balance = line 050/line 010 (form 2);
RP balance = line 2200/line 2010.

How to calculate gross and operating profitability?

RPVP =VP / TV, Where

VP— gross profit from sales of goods;

TV— revenue from sales of goods.

Gross profit- the sum of the entire profit of the enterprise, the difference between commodity revenue and the amount of expenses that was used to produce products, that is, cost.

OR = EBIT / TV, Where

EBIT- profit before taxes or interest have been subtracted from it.

EBIT- this is an indicator between the net profit of the enterprise and all profit.

EBIT = PE - PR - NP, Where

Emergency- net profit;

ETC— expenses as a percentage;

NP— the amount of income tax.

Net return on sales

Level of net return on sales or RP for net profit– is the share of net profit from the gross revenue of the enterprise.

This is one of the most visual indicators of the efficiency of an enterprise, as it shows how many kopecks of net profit are contained in one ruble of company sales.

RP pure = PE/TV, Where

Emergency- net profit;
TV– commodity revenue (gross revenue) of the enterprise.

These indicators can be obtained in two ways:

Find in the company's statements, namely in Form 2 “Report on financial results”
If the first option is not acceptable for some reason, then you can independently calculate the necessary indicators.

TV = K*C, Where

TO– quantity of products sold in units;
C– unit price.

PP = TV – S/S – N – R others + D others, Where

S/S– total cost of production;
N– taxes;
R other- other expenses;
D other- Other income.

Others include income and expenses from non-core activities of the enterprise:

Coursework difference;
Income/expenses from the sale of various securities;
Income from equity participation.

Return on sales is a clear indicator for determining the share of various types of profit in the gross revenue of an enterprise.

By tracking the profitability indicator over time, the company manager receives information about the dynamics of development and the pace of achievement of the strategic goals outlined by the management of the enterprise.

Return on sales - meaning

Return on sales– this is a kind of litmus test for determining the effectiveness of an enterprise’s pricing policy. Can be used to control company costs.

Having made the necessary calculations, the company manager will see how much money will remain after covering costs at cost and making all necessary payments (interest on loans, settlements with the budget, etc.).

The return on sales indicator is a tool for analyzing the financial condition of the reporting period. It is not suitable for medium- and long-term strategic planning.

The KRP has grown.

This situation indicates:

The increase in expenses lags behind the receipt of funds from the activities carried out.

Prerequisites:

Increase in volumes of commodity revenue, which is most likely associated with an increase in the volume of sales of goods or provision of services. In this case, the so-called production leverage effect arises;
Changing the range of products sold, which is a good alternative to increasing prices for goods to increase the gross revenue of the enterprise. At the same time, the cost of production can be significantly reduced, which will also lead to an increase in product revenue.
Reducing costs occurs faster, generating cash for the enterprise's activities.

Causes:

Increased cost of production(goods or services);
Range of products sold has changed significantly.

For any of the above reasons, the profitability of sales formally increases. The share of profit will become larger, but in physical terms it will remain unchanged or decrease.

Cause- This is a decrease in product revenue. This increase in the indicator is not clearly positive. It is necessary to track the situation over time. And also analyze the product range and pricing mechanism.

The money supply from ongoing activities grows, and the company’s expenses fall.

Prerequisites:

Change pricing policy;
Sales structure changed;
Costs have changed according to the regulations.

This state of affairs is the most acceptable and desirable for the enterprise. Further analysis in this case should be aimed at calculating the stability of the company's position.

The CRP has decreased.

This situation means that:

Increase in money supply from ongoing activities I can’t keep up with the increase in company expenses.

Prerequisites:

Increased expenses against the backdrop of inflation;
Changing the company's pricing policy towards maximum reduction in the cost of products (goods, services);
Changes in demand for goods;
A decrease in the indicator is extremely unfavorable regardless of which reason had the greatest impact.
The decrease in the growth of money supply from the sale of products occurs faster than reducing the company's expenses.

Prerequisites:

Demand for products enterprises fell significantly.
The situation is quite standard. Almost every enterprise has seasonal activity. However, it is necessary to analyze what is causing the drop in sales.
Expenses increased amid decrease commodity revenue.

Prerequisites:

Reduced product costs(goods or services);
Changes in demand for various groups of goods enterprises.
The trend is extremely unfavorable. It is necessary to control the sales structure, the pricing policy of the enterprise and the cost accounting system.

They are obtained by dividing the profit from the sale of products by the amount of revenue received. The initial data for its calculation is the balance sheet.

It is calculated in the FinEkAnalysis program in the Profitability Analysis block as Return on Sales.

Return on sales - what it shows

Shows how much profit the company receives from each ruble of products sold.

Return on sales - formula

General formula for calculating the coefficient:

Calculation formula based on the old balance sheet data:

K rp =	page 050	*100%
	p.010

where line 050 and line 010 of the profit and loss report (form No. 2).

Calculation formula based on the new balance sheet:

Return on sales - meaning

It is used as the main indicator for assessing the financial performance of companies with relatively small amounts of fixed assets and equity capital. Assessing the profitability of sales makes it possible to objectively look at the state of affairs.

The return on sales indicator characterizes the main aspect of the company's work - the sale of main products.

Return on sales - diagram

1. Increasing the indicator.

a) Revenue growth rates outpace cost growth rates. Possible reasons:

increase in sales volumes,
change in sales mix.

With an increase in the number of products sold in physical terms, revenue increases faster than costs as a result of production leverage.

The components of product cost are variable and fixed costs. Changing the cost structure can greatly affect profit margins. Investing in fixed assets is accompanied by an increase in fixed costs and, theoretically, a decrease in variable costs. Moreover, the relationship is nonlinear, so finding the optimal combination of fixed and variable costs is not easy.

In addition to simply raising prices for its products, a company can increase revenue by changing its product mix. This trend in the development of the enterprise is favorable.

b) The rate of cost reduction is faster than the rate of revenue decline. Possible reasons:

increase in prices for products (works, services),
change in the assortment structure.

In this case, there is a formal improvement in the profitability indicator, but the volume of revenue decreases; the trend cannot be called unambiguously favorable. To correctly draw conclusions, analyze the pricing policy and assortment policy of the enterprise.

c) Revenue increases, costs decrease. Possible reasons:

price increase,
change in sales mix,
change in cost standards.

This trend is favorable, and further analysis is carried out to assess the sustainability of this position of the company.

2. Decrease in indicator.

a) The growth rate of costs outpaces the growth rate of revenue. Possible reasons:

inflationary growth in costs outpaces revenues,
price reduction,
change in the structure of the sales range,
increase in cost standards.

This is an unfavorable trend. To correct the situation, they analyze the issues of pricing at the enterprise, assortment policy, and cost control system.

b) The rate of revenue decline is faster than the rate of cost reduction. Possible reasons:

reduction in sales volumes.

This situation is common when an enterprise reduces its activities in the market. Revenue declines faster than costs as a result of operating leverage. An analysis of the company's marketing policy should be made.

c) Revenue decreases, costs increase. Possible reasons:

price reduction,
increase in cost standards,
changing the structure of the sales range.

An analysis of pricing, cost control systems, and assortment policy is required.

In normal (stable) market conditions, revenue dynamics change faster than costs only under the influence of production leverage. The remaining cases are associated either with changes in the external and internal conditions of the enterprise’s functioning (inflation, competition, demand, cost structure), or with an ineffective system of accounting and control in production.

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Synonyms

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The profitability ratio is the ratio of the net profit (after payment of all taxes and interest) of an enterprise to the total amount of sales, i.e., to revenue. It reflects the efficiency of the organization, its financial results and shows how much of the proceeds from sales is profit. The indicator value must be above zero, which means that the company is profitable. Otherwise, it is unprofitable. For the calculation, data from the income statement are used.

The goal of any commercial organization is to make a profit. The further development of the enterprise and its financial stability depend on its size. Company management, when analyzing operating results, uses different ratios, including profitability indicators, which give an idea of how much profit is received on the amount of invested funds, equity capital, total assets or revenue.

Determination of the coefficient

The profitability ratio (return on sales - ROS) shows what percentage of profit is contained in the total revenue of the enterprise. This relative indicator is used by management, investors and creditors to analyze the company's business activity and its performance.

Why is the profitability ratio calculated?

The ROS value allows you to evaluate:

level of business activity;
share of profit in revenue volume;
risks of increasing production costs;
overall efficiency of the enterprise.

The indicator is calculated for both internal and external use. With its help, the company’s management decides on the need to reduce costs, commercial, administrative or other expenses. Investors and lenders evaluate the degree of profitability and the margin of financial strength.

Important! For company management, investors and creditors, what is important is not the sales volume itself, but how much net cash is received from these sales.

Normative value

ROS should be above 0. If this is not the case, then the management of the enterprise is ineffective and it incurs losses. The standard values of this indicator depend on the industry of production:

agriculture - 9%;
retail trade - 2.2%;
real estate transactions - 5.7%.
oil and gas production - 4.1%;
food production - 1.5%;
construction of buildings - 1.1%.

Reference! There are no strict ROS standards. These are only average values for industries for the year, collected by Rosstat based on the results of an analysis of the activities of Russian companies.

You can view the full list of average values by downloading the Excel file.

In general, an enterprise is considered:

low-profit if ROS is in the range of 1-5%;
averagely profitable with ROS from 5% to 20%;
highly profitable if the indicator is 20-30%;
super profitable if the value exceeds 30%.

The efficiency of economic activity can be judged by analyzing the indicator over time. Its increase indicates high sales efficiency and reduced production costs.

Calculation procedure

The indicator is calculated using the formula:

where PE is net profit, i.e. the profit remaining after paying interest and taxes;

B - revenue from sales of products.

Important! This formula is used exclusively for Russian financial statements. In Western practice, ROS is calculated not by net profit, but by earnings before taxes (EBIT).

The values of the indicators are taken for the same period, usually a year. Several coefficients are calculated, ideally over 5 years, to assess the dynamics.

Formula for accounting forms

To calculate the ROS indicator, data from the income statement is used.

where page 2400 of the f. report. R. - the value of line 2400 of the financial results report;

page 2110 of the report on f. R. - the value of line 2110 of the financial results statement.

ROS belongs to the group of profitability ratios:

EBIT return on sales - the ratio of profit before tax to sales volume;
return on assets (ROA) - PE divided by the assets of the enterprise;
product profitability - the ratio of EBIT to cost of goods sold;
return on equity (ROE) - characterizes the ratio of private equity to the amount of equity capital.

Calculation example

As an example, let’s calculate the profitability ratio of PJSC LUKOIL for the last three years using Russian and Western financial analysis systems.

Data source: official website of PJSC LUKOIL

As the calculation showed, the value of the coefficient over the past years is significantly higher than all standard values. PJSC LUKOIL is a highly profitable enterprise. In 2015, the profitability ratio exceeded 100%, which indicates that the company has significant income from other activities not related to the sale of products. In this case, the drop in the coefficient in 2016 does not play a significant role, since its value is extremely high, and the increase next year indicates that the difficulties encountered were temporary.

You can download a table with calculations of the profitability ratio (ROS) in a convenient format -

The level of economic efficiency of a financial, labor or material resource is characterized by such a relative indicator as profitability. It is expressed as a percentage and is widely used to evaluate the performance of a business enterprise. There are many types of this concept. Any of them is the ratio of profit to the asset or resource under study.

The essence of the concept of profitability ratio

The return on sales ratio shows the business activity of the enterprise and reflects the efficiency of its work. Evaluation of the indicator allows you to determine how much money from product sales is the company’s profit. What matters is not how much product was sold, but how much net profit the company earned. Using the indicator, you can also find the share of cost in sales.

The return on sales ratio is usually analyzed over time. A rise or fall in an indicator indicates various economic phenomena.

If profitability increases:

An increase in revenue occurs more quickly than an increase in costs (either sales volumes have increased or the assortment has changed).
Costs are decreasing faster than revenue is decreasing (the company has either raised product prices or changed the assortment structure).
Revenue grows, but costs become lower (prices have increased, the assortment has changed, or cost standards have changed).

The first two situations are definitely favorable for the company. Further analysis is aimed at assessing the sustainability of this situation.

The second situation for the company cannot be called unambiguously favorable. After all, the profitability indicator has formally improved (revenue has decreased). To make decisions, pricing and assortment are analyzed.

If profitability has decreased:

Costs grow faster than revenue (due to inflation, lower prices, increased cost standards, or changes in product mix).
The decline in revenue occurs faster than the reduction in costs (sales have fallen).
Revenue becomes less, and costs increase (cost rates have increased, prices have decreased, or the assortment has changed).

The first trend is clearly unfavorable. Additional analysis of the reasons is needed to correct the situation. The second situation indicates the company's desire to reduce its sphere of influence in the market. If a third trend is detected, pricing, assortment, and cost control systems need to be analyzed.

How to Calculate Return on Sales in Excel

The international designation of the indicator is ROS. The return on sales ratio is always calculated based on sales profit.

Traditional formula:

ROS = (profit/revenue) * 100%.

In specific situations, it may be necessary to calculate the share of gross, book or other profit in revenue.

Formula for gross return on sales (margin):

(Gross profit / sales revenue) * 100%.

This indicator shows the level of “dirty” money (before all deductions) earned by the company from the sale of products. The elements of the formula are taken in monetary terms. Gross profit and revenue can be found on the income statement.

Information for calculation:

In the cells for calculating gross profitability, we will set the percentage format. Enter the formula:

The gross profit margin indicator for 3 years is relatively stable. This means that the company carefully monitors pricing procedures and monitors the product range.

Operating profit margin (EBIT):

(Operating profit / sales revenue) * 100%.

The indicator characterizes how much operating profit is per ruble of revenue.

((Page 2300 + Page 2330) / Page 2110) * 100%.

Data for calculation:

Let's calculate the profitability of operating profit - substitute references to the required cells into the formula:

Formula for return on sales based on net profit:

(Net profit / revenue) * 100%.

Net profitability shows how much net profit is per ruble of revenue. Both figures are taken from the income statement.

Let's show the return on sales ratio on the graph:

In 2015, the indicator decreased significantly, which is regarded as an unfavorable phenomenon. Additional analysis of the assortment list, pricing and cost control system is required.

A value above zero is considered normal. The more specific range depends on the field of activity. Each enterprise compares its return on sales ratio and the standard value for the industry. It’s good if the calculated indicator practically does not differ from the inflation rate.

One of the main indicators of an organization's performance is return on sales based on net profit. What does this indicator characterize? How is it calculated? All the details are below.

What is return on sales based on net profit?

The concept of profitability is directly related to the success, that is, profitability of any business. This financial indicator can be calculated for the enterprise as a whole or separately for its divisions (types of activity). In the process of calculations, it is easy to determine the return on assets, fixed assets (fixed assets), sales, goods, capital, etc. First of all, the calculation is based on the analysis of income accounting data for a certain time period.

Analysis of profitability values allows you to find out how effective is the management of the funds invested in the creation and further development of the company. Since calculations are carried out as a percentage or as a coefficient, the higher the results obtained, the more profitable the business is considered. Profitability calculation is used in the following situations:

For short- and long-term profit forecasting.
When receiving credits and loans.
When developing new directions and analyzing existing types of commercial activities.
During industry benchmarking.
In order to justify upcoming investments and investments.
To establish the real market price of a business, etc.

The return on sales indicator indicates what part of the company's revenue is profit. In other words, how much income did each ruble of sold products (works or services) generate? By managing this ratio, the head of the company can adjust the pricing policy, as well as current and future costs.

Return on sales based on net profit - formula

When calculating the indicator, the organization's accounting data for a given period of time is used. In particular, to determine the profitability of sales, information on net profit is required, which is indicated on page 2400 f. 2 “Report on financial results” (the current form was approved by the Ministry of Finance in Order No. 66n dated 07/02/10).

The formula looks like this:

RP = PE of the company / B, where:

RP is the value of return on sales,

PE - the amount of net profit (line 2400 f. 2),

B – the amount of revenue (line 2110 f. 2).

Additionally, to refine the indicators, you can calculate gross profit margin or operating profitability. Formulas change in accordance with specified goals:

RP for VP = VP of the company / B, where:

RP for VP - gross profit margin,

VP of the company - gross profit of the company (line 2100 f. 2),

B is the amount of revenue.

Operating RP = Profit before taxation (line 2300 f. 2) / V.

What return on sales value is considered normal?

We have already found out that RP shows the level of profit for a certain period. In dynamics, this coefficient helps to establish how the profitability of a business changes over time. To do this, analyze data for several periods - basic and reporting. Then it is easy to calculate the profit margin by performing factor calculations.

What profitability value is considered normal? There is no clear answer to this question. Optimal indicators depend on the type and specifics of the activity of the enterprise or its division. Of course, the higher the value obtained, the better, but the results can also be influenced by such factors as the duration of the production cycle, the presence of investments, etc.

The average indicator of good profitability is considered to be a coefficient in the range of 20-30%, average - 5-20%, low - 1-5%.