One of the details that investors and potential shareholders use to evaluate a company is its sales per share. Sales per share, also called revenue per share, is a basic financial ratio that you can calculate by hand. To perform this calculation you must first analyze the company’s financial reports to gather pertinent information.
First determine the sales for the period to figure out sales per share. The usual period that investors use to calculate this ratio is one year (12 months). So for example, assume revenue for the year in question totals $100,000.
The next detail you must collect from financial statements or company records is the number of average shares outstanding during the period (one year in this case). Each share represents one unit of ownership in the business. In some cases the number of total shares outstanding fluctuates, which is why you would need the average outstanding during the period (usually listed in company reports). In this example, the average shares outstanding for the year total 1,400.
The formula to use for this calculation is the yearly sales revenue divided by the total average outstanding shares for the year. In this example the sales per share is $100,000 divided by 1,400, or approximately $71.42 in sales per one share.
Sales per share gives you an idea of how well a company utilizes its investment to generate sales over a year. The better the sales per share, the more productive the company in terms of bringing in sales. Investors also use sales per share to calculate the price-to-sales ratio for a business (stock price divided by sales per share). Price-to-sales is another indicator investors use to estimate the viability of a company.
Louise Balle has been writing Web articles since 2004, covering everything from business promotion to topics on beauty. Her work can be found on various websites. She has a small-business background and experience as a layout and graphics designer for Web and book projects.