ROS ratio

Return on sales (ROS), also called the operating profit margin, is a profitability ratio that shows what portion of a company's revenue is left over as operating profit after covering the everyday costs of running the business. In plain terms, it tells you how many cents of profit each euro or dollar of sales actually generates. A higher ROS means the company keeps more of every sale, which points to tight cost control and healthy pricing, while a low or falling ROS warns that expenses are eating into revenue. Because it strips out the effects of financing and taxes, ROS is especially useful for judging the quality of a firm's core operations. Investors and managers watch it over time to spot whether a business is becoming more or less efficient, and a steadily rising margin is often read as a sign of strengthening operations. It also makes for a fair comparison between companies of very different sizes, since it is expressed as a percentage rather than an absolute figure. That said, ROS is most meaningful within a single industry, because a supermarket and a software firm operate on completely different margin levels.