COST ACCOUNTING
PERFORMANCE MEASUREMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Operating profit ÷ Sales
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Sales ÷ Operating profit
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Operating profit ÷ (Sales x required rate of return)
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Sales ÷ (Operating profit x required rate of return)
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Detailed explanation-1: -Key Takeaways. Return on sales (ROS) is a measure of how efficiently a company turns sales into profits. ROS is calculated by dividing operating profit by net sales. ROS is only useful when comparing companies in the same line of business and of roughly the same size.
Detailed explanation-2: -Although the two are often considered synonymous, there is a difference. The difference between ROS and operating margin lies in the numerators (top part of the equation)-the ROS uses earnings before interest and taxes (EBIT), while the operating margin uses operating income.
Detailed explanation-3: -The Return on Sales ratio is calculated by dividing operating profit by net revenue from sales. The return-on-sales formula is as follows: Return on Sales (ROS) = Operating Profit / Net Sales Revenue.
Detailed explanation-4: -The return on sales ratio is a financial ratio that shows how much of your overall revenue is actually profit and how much is being used to pay down operating costs.
Detailed explanation-5: -Operating profit is calculated by taking revenue and then subtracting cost of goods sold (COGS), operating expenses, and depreciation and amortization.