Operating Income to Sales
Operating Income to Sales compares Earnings Before Interest
and Taxes (EBIT) to Sales. By using EBIT, we place more emphasis on operating
results and we more closely follow cash flow concepts. Operating Income to Sales
is calculated as follows:
EBIT / Net Sales
EXAMPLE - Net Sales are $ 460,000 and Earnings Before
Interest and Taxes is $ 100,000. This gives us a return of 22% on sales, $
100,000 / $ 460,000 = .22. For every $ 1.00 of sales, we generated $ .22 in
Operating Income.
