An important metric in detail is that it is returned on sale, and we will also see how to calculate it. So in every business, Its main purpose is to make sales and earn profits for the organization. So the return on sales is an important matrix to understand the operational efficiency of the organisation. What is a return-on-sale? Return on sale is the ratio between operating profit and net sales. It defines how efficiently the company can generate operating profit from its revenue. So this is the definition of a return on sale. Now that I understand the formula to calculate the return on sale, the return on sale is obtained by dividing operating profit by net sales. Porating profit is incurred in the business operation before interest and tax are added. And then net sales are the total income made by the company by selling products and services to customers. So return on sale is also not an operating profit margin. If we can say that companies are not doing business to recover the investment, then that business is undergoing a loss.

Consider that the company has total operating expenses of $300,000. And the company is making sales of $500,000. Now the operating profit of the company will be net sales minus operating expenses, which is $500,0000-$300,000. Operating profit is $200,000. So to calculate the return on sales, we need operating profit and net sales. In this example, the operating profit is $200,000, as we have calculated, and the net sales are $500,000. The return on sale will be the operating profit divided by the net sales. $200,000 divided by $500,000 is equal to 0.4. We have to multiply 0.4 by 100 so that it will be 40%. So in this example, the return on sales is 40%.