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Return on Sales, ROS , is a good metric for dashboards

Return on Sales, ROS , is a good metric for dashboards. Ted Mitchell. ROS : A Popular Metric. ROS is defined as the ratio of the profit , Z, divided by the sales revenue, R, The Ratio of the Bottom line (Profit) divided by the Top Line (Sales Revenue). Profit, Z. ROS =.

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Return on Sales, ROS , is a good metric for dashboards

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  1. Return on Sales,ROS, is a good metric for dashboards Ted Mitchell

  2. ROS: A Popular Metric • ROS is defined as the ratio of the profit , Z, divided by the sales revenue, R, • The Ratio of the Bottom line (Profit) divided by the Top Line (Sales Revenue) Profit, Z ROS = Sales Revenue, R

  3. A High ROS Implies Efficiency • If you have to choose between two operations and both generate equal profits, then pick the one that has the highest ROS because it is more efficient • Profit = output • Revenue = input • The ratio input/output = efficiency

  4. ROS: Popular Metric • ROS is defined as the ratio of the profit , Z, divided by the sales revenue, R, • It can defined at several levels of the firm’s operations • 1) Strategic ROS: the net profit divided by revenue for the firm as whole • 2) SBUROS: the net profit for a strategic business unit divided by the sales revenue generated at the SBU level

  5. Tactical Analysis • 3) MROS: Marketing Return on Sales is the Profit after Promotion Expense, (G-E), for the period divided by the Revenue generated by a brand or product category for the period MROS = (G – E)/R • 4) GROS: the Gross Return on Sales is the Gross Profit, G, after the Cost of Goods Sold, COGS, divided by the Revenue for the period GROS = (R – COGS)/R = G/R

  6. GROSis closely related to Markup on Price, Mp • Markup on Price, Mp. is defined as the profit margin per unit sold (P-V) divided by the selling price, P • If there is only one type of product being sold the GROS is equal to the Markup on Price • Mp = (R-COGS)/R • (P-V)/P = (P-V)Q/PQ = (R-COGS)/R

  7. Dollars ROS = Z/R Maximum Revenue Maximum Profit Selling Price Pr* Pz*

  8. The ROSdoes not tell you when to raise the selling price or when to lower it for more profit ROS Price, P

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