From operating profit and operating revenue, compute the return on sales (ROS), i.e. the operating profit margin.
Input Data
Results
At a glance:ROS is operating profit divided by operating revenue, measuring operating profitability as a share of sales.
Formula
returnOnSales = operatingProfit / revenue × 100%
$$ROS = \dfrac{OperatingProfit\ (EBIT)}{Revenue} \times 100\%$$How to Use
- Enter the operating profit (EBIT).
- Enter the operating revenue.
- Read the return on sales.
FAQ
What is the difference between ROS and net margin?
ROS uses operating profit (EBIT) and ignores interest, tax and one-offs, reflecting core operating efficiency. Net margin uses net profit after all expenses — it reflects the overall profitability including financing and tax. The two together show how much interest and tax erode the final profit.
What ROS is considered good?
There is no absolute standard because industries differ hugely. Software, branded consumer goods and patented drugs often run ROS above 20%, while retail, wholesale and trading may be only a few percent yet still normal. Compare with peers and your own history: above peers means better cost control; a rising trend means improving efficiency. Never compare ROS across industries directly.
What does a falling ROS mean?
A falling ROS means each dollar of sales leaves less profit — causes include rising material or labour costs, price cuts to win share, higher expenses, a shift to low-margin products, or intensifying competition. Revenue growth with falling ROS is a warning sign ('selling at a loss for volume'). Break down the gross margin and expense structure to find where profit is being eroded, then judge whether it is short-term or structural.
How is ROS related to ROA and ROE?
They measure different things but link via DuPont analysis. ROS = operating profit ÷ revenue (margin per dollar of sales); ROA = net profit ÷ total assets (return per dollar of assets); ROE = net profit ÷ equity (return per dollar of shareholders' funds). ROE = net margin × asset turnover × equity multiplier, where net margin is a close cousin of ROS. So ROS is only one of three levers on ROE (the others are turnover and leverage) — a low-ROS retailer can still deliver a decent ROE via high turnover.
Which Hong Kong industries have high or low ROS?
High ROS tends to sit with high-value-add or pricing-power sectors — professional services (legal, accounting, financial advisory), branded/luxury retail, some software and tech services, and near-monopoly utilities (power, gas). Low ROS sits with thin-margin, competitive or cost-rigid sectors — supermarkets, wholesale trading, catering, construction contracting, labour-intensive services. A supermarket at 3% ROS and a software firm at 25% are both normal for their model; compare each only with its own industry peers and history, not across sectors.
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.