Return on Revenue (ROR)

Posted in Finance, Accounting and Economics Terms, Total Reads: 2018
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Definition: Return on Revenue (ROR)

Return on revenue is the net income a company makes on the revenue it earns. It is an indicator of the profitability of the company.

Return on Revenue = Net Income / Revenue

 

Net income is the income of the company post deduction of cost of goods sold, operational expenses, interest expense and taxes. It is the income that the company gets to retain from its revenue.

Net Income = Revenue – COGS – Operating Expenses – Interest Payment – Taxes

 

When ROR of a company increases, it means that the company is making more for what it is earning as revenues, which implies that it is cutting down on its expenses. On the other hand, when ROR decreases, it signals that the company is incurring more expenses and thereby making lesser profits.

 

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