How do you calculate the return on sales for a business with a net income of $25,000 and sales of $60,000?

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To calculate the return on sales (ROS), you need to use the following formula:

Return on Sales (ROS) = (Net Income / Sales) x 100

In this case, the net income is $25,000 and the sales are $60,000. Let’s break down the calculation step by step:

  1. Identify the Net Income: This is the profit a business has after all expenses are deducted. For our example, it is $25,000.
  2. Identify the Total Sales: This refers to the total revenue generated from goods or services sold. Here, it amounts to $60,000.
  3. Insert the Values into the ROS Formula:
    • ROS = ($25,000 / $60,000) x 100
  4. Perform the Division:
    • $25,000 / $60,000 = 0.4167
  5. Multiply by 100:
    • 0.4167 x 100 = 41.67%

So, the return on sales for this business would be 41.67%. This means that for every dollar of sales, the company earns approximately $0.4167 in profit. A higher return on sales indicates a more efficient business, while a lower percentage may suggest room for improvement in cost management or pricing strategies.

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