About Return on Revenue Calculator (Formula)
The Return on Revenue (ROR) formula, also known as the profit margin, is a financial metric used to measure a company’s profitability by calculating the percentage of profit it generates from its revenue.
The ROR formula is calculated as:
ROR = (Net Income / Revenue) x 100%
Where:
- Net Income: The amount of profit a company earns after deducting all expenses from its revenue
- Revenue: The total amount of money earned by a company through its sales
The ROR formula helps businesses understand the percentage of their sales revenue that turns into profit. A higher ROR indicates that a company is generating more profits from its revenue, which is a positive sign of financial health. On the other hand, a lower ROR indicates that a company may be struggling to control its costs or is facing pricing pressures in its industry.
It’s important to note that the ROR formula can be used for both individual products or services, as well as for the company as a whole. By calculating ROR for each product or service, businesses can identify which products are more profitable and focus their resources accordingly.
Overall, the ROR formula is a useful tool for measuring a company’s profitability and can help businesses make informed decisions about pricing, cost control, and resource allocation.