Tools for restaurant financial analysis – Part III
By David Scott Peters
Restaurant Tip of the Week
Return on sales (ROS).
The ROS ratio indicates both the profitability and the risk level of the restaurant. The calculation is completed by dividing net profits by sales volume. When the ratio is low, the profitability is very sensitive to changes in operation cost and cost of goods sold fluctuations. Changes in the ROS reflect trends in the operational efficiency of the restaurant and can reflect trends in the market in general.
Net profit/Sales volume = ROS
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