Net Income Over Revenue Ratio

For the purpose of this ratio net profit is equal to gross profit minus operating expenses and income tax.

Net income over revenue ratio. An increase in ror is means that the company is generating higher net income with lesser expenses. Net income equals total revenues minus total expenses and is usually the last number reported on the income statement. Expresses the percentage of net income relative to stockholders equity or the rate of return on the money that equity investors have put into the business. Return on revenue ratio net income total sales revenue.

The profit margin ratio formula can be calculated by dividing net income by net sales. Net sales is calculated by subtracting any returns or refunds from gross sales. Net profit margin is calculated by dividing the net profits by net sales or by dividing the net income by revenue realized over a given time period. The only difference between net income and revenue is the expenses.

Compute the figure by dividing labor cost by net sales for a given accounting period. In the context of profit margin calculations. Net income goes even further than net gross margin because you deduct all other expenses including overhead and taxes. Revenue refers to the sum of money which the company generates from doing the business in the normal course of operations from its customers whereas net income refers to the income earned by the company or the income left over in the company after deducting all the expenses of the period from the net revenue.

People often refer to net income as the bottom line as it is the last line item on an income statement. This ratio can help the management in controlling the expenses. The formula for net income is simply total revenue minus total expenses. Labor to revenue ratio shows how much a company spends on its employees to generate net sales.

Differences between revenue and net income. The product of this formula is expressed in a decimal number but multiplying the result by 100 converts it to percentage. The roe ratio is one that is particularly watched by. Similar to the net profit margin ratio to find this ratio you just need to take the net income and then divide it by the total sales revenue.

Roe combines the income statement and the balance sheet as the net income or profit is compared to the shareholders equity. It can give indications of rising expenses.