Return on sales (ROS) is a financial metric that is used to evaluate the operational efficiency of a company. The ratio shows how much profit a company generates on its sales.

 

The formula:

ROS = Net Income (Before Interest and Tax) / Sales

 

A high ROS would signal that the company is efficient in its operations. Compared to this, a low ROS would signal low efficiency.

 

Investors might be compelled to invest in companies that show a high ROS, because this might signal that the company is efficient, and that the cost structure of its operations enables profits to be gained.