Net Sales

Net sales refers to the final actual sales delivered to customers. It is gross sales less discounts, advertising campaign costs, returns and allowances.

Operating Profit Margin – Formula and Understanding

Operating Profit Margin

Operating profit margin refers to the value earned as a percentage of net sales. The operating profit is often referred to as earnings before interest, taxes, depreciation and amortization, (EBITDA). This is a misleading reference as operating profit is actually defined differently by industry sector. EBITDA is used primarily in valuing businesses.

Total Assets Turnover Rate – Formula and Analysis

Total Assets Turnover Rate

Within the group of activity ratios, the total assets turnover rate is the broadest in scope. Similar to other activity ratios, it utilizes net sales as the numerator. However the denominator doesn’t focus in on a single balance sheet asset group like the working capital turnover or fixed assets turnover rates, it includes all assets.

Working Capital Turnover

Working Capital Turnover

The activity ratios measure performance of a current asset on the balance sheet against a corresponding area of the income statement. The working capital turnover is the most encompassing of all the activity ratios; in effect, it is the most general of the activity ratios.  This particular ratio measures the ability of management to efficiently utilize net current assets.