Return on Sales (also referred to as net profit margin or net income margin) measures how much profit a company makes for each dollar in revenue. While the net profit will give us the actual amount of money earned, the return on sales gives us a percentage. This in turn provides us with a measure we can now use to compare companies or business units.
Return on Sales is an important indicator measuring how efficient a company (or business unit) is and how well it is able to control its costs.
Return on Sales = (Net Profit / Revenues) x 100
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