After-Tax Return On Sales

A profitability measure that indicates how well a company uses its sales revenue. To calculate after-tax return on sales, divide the company's after-tax net income by its total sales revenue. The resulting figure, multiplied by 100, will be a percentage; the higher the percentage, the more efficiently the company uses its sales revenue.

Profitability ratios like after-tax return on sales and after-tax return on assets are useful for comparing different companies within the same industry. However, because profit-margin standards can vary widely by industry, it would not make sense to compare the after-tax return on sales of an automobile manufacturer to that of a clothing store. In addition, a single profitability ratio only provides a small piece of the overall picture of a company's financial performance; investors should use a number of ratios to develop an accurate analysis.


Investment dictionary. . 2012.

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