Return on revenue (ROR) is a company's total earnings divided by its revenue. It is a measure of how efficiently a company generates profit from its sales. A higher ROR indicates a more profitable company.
To calculate ROR, divide a company's net income by its revenue.
net income / revenue = ROR
For example, if a company has a net income of $5 million and revenue of $20 million, its ROR would be 25%.
return on revenue = 25%
What is revenue and its types?
Revenue is the total amount of money that a company brings in through its sales of goods or services. There are two types of revenue: gross revenue and net revenue.
Gross revenue is the total amount of money that a company brings in through its sales of goods or services before any expenses are deducted. Net revenue is the total amount of money that a company brings in through its sales of goods or services after all expenses have been deducted.
What are the 5 profitability ratios? Profitability ratios are financial ratios that measure a company's ability to generate profits. There are many different profitability ratios, but the five most important are gross margin, operating margin, net margin, return on assets (ROA), and return on equity (ROE).
1. Gross Margin: Gross margin measures the percentage of revenue that a company keeps after accounting for the cost of goods sold. A company with a higher gross margin is more profitable because it is able to generate more revenue from each sale.
2. Operating Margin: Operating margin measures the percentage of revenue that a company keeps after accounting for all of its operating expenses. A company with a higher operating margin is more profitable because it has lower operating expenses.
3. Net Margin: Net margin measures the percentage of revenue that a company keeps after accounting for all of its expenses, including taxes. A company with a higher net margin is more profitable because it has lower expenses and pays less in taxes.
4. Return on Assets (ROA): ROA measures the percentage of a company's profits that are generated from its assets. A company with a higher ROA is more profitable because it is able to generate more profits from its assets.
5. Return on Equity (ROE): ROE measures the percentage of a company's profits that are generated from its shareholders' equity. A company with a higher ROE is more profitable because it is able to generate more profits from its shareholders' equity. What is the other term used for an income statement? The other term used for an income statement is a “profit and loss statement.”
What are 4 types of revenue? Revenue can be classified into four distinct types:
1. Operating revenue: Operating revenue is generated from the core operations of a business. This is the revenue that is directly associated with the production and sale of a company's products or services.
2. Non-operating revenue: Non-operating revenue is generated from sources that are not directly related to the core operations of a business. This can include things like interest income, dividends, and gains from the sale of assets.
3. Discontinued operations: Discontinued operations are those that have been shut down or sold off by a company. The revenue generated from these operations is no longer part of the company's ongoing business.
4. Extraordinary items: Extraordinary items are those that are not considered to be part of normal business operations. This can include things like natural disasters, one-time gains or losses, and other exceptional items. How is return ratio calculated? The return ratio is calculated by dividing the net income by the total assets.