Price to Sales Ratio Calculator
Answers the Question
How much does money does the company bring in per share?
Calculator for Price to Sales Ratio
What Is the Price to Sales Ratio?
This formula is a measure of income per share. Although less popular than the earnings per share formula, it still provides insight into a company's economic activities.
Why Is it Important?
- As a general rule, the lower the ratio, the greater the income received per unit of investment.
Formula(s) to Calculate Price to Sales Ratio
- PRICE TO SALES RATIO = MARKET CAP IN DOLLARS / REVENUE IN DOLLARS
Common Mistakes
- This ratio will prove misleading for firms with expectations of lowered revenues in the future, but strong revenues now, as it does not take sentiment into account.
- This ratio does not speak to the profitability of existing ventures, so much as income. For this reason, firms with high expenses may appear stronger than they are. For this reason, this ratio is rarely used across industries.
- Some firms may attempt to manipulate this ratio by pulling demand forward. For instance, a company that books income from future months in the present will enjoy higher ratios without altering its lifetime income.