What is the after-tax return on sales
After-tax return on sales-a measure of profitability that shows how well a company uses its sales revenue. To calculate after-tax return on sales, divide the company’s net income after tax by total revenue. The resulting figure is multiplied by 100, is percentage, the higher the percentage, the more efficiently the company uses its proceeds from sales.
Breaking down the ‘after-tax on sale
Margins after taxes on sales and profit after taxes for the property are useful for comparing different companies within the same industry. However, since the profit-margin standards can vary widely depending on industry, so it makes sense to compare after-tax return on sales of the automaker in a clothing store. In addition, one rate of return provides only a small part of the overall picture of the financial condition of the company, and investors should use a number of ratios to obtain a reliable analysis of the company.
Financial performance after tax on sale
Investors use various financial indicators to assess the effectiveness of a private company, including after taxes on sales. No single financial indicator that can tell whether a company is successful or not, because different industries have different cost structure and level of competition.
Companies that show higher levels after taxes on sale, as a rule, in industries with a higher profit margin and lower taxes. Profit margin per dollar of revenues, which is booked as a profit is spent as expenses. Industries with less competition tend to have lower profit margins because less companies fighting for the same consumer demand. With a higher level of competition, the greater the pressure to reduce prices.
Taxes are another important factor after taxes on sales. In jurisdictions with high taxes, after-tax return on sales will be less, because the metric takes into account how much the company must pay the government in taxes.
Industry and after taxes to sales
Investors expect a different level of after-tax return on sales depending on the industry in which the company is involved. In the framework of the S&P 500 index in pharmaceutical and biotechnology companies typically have higher after-tax return on sales, as well as energy and exploration companies and software and related services. In the United States, consumer goods companies, which sell essential products, such as those provided by supermarkets, as a rule, have low after-tax returns on sale.