Research & development to revenue ratio

What is Research & development to revenue ratio?

Research & development to revenue ratio represents research and development as a percent of sales for the period.

Formula:

Research and development expense / Total revenue * 100%

What does Research & development to revenue mean?

The Research & development (R&D) to revenue ratio indicates what percentage of Total revenue goes to the development of a company. It is necessary to compare the indicator to companies from the same industry, as companies from different industries will have completely different indicators and therefore skew comparison results. For example, technology companies and pharmaceutical companies are more likely to spend more on R&D and have far different ratios compared to other industries or sectors.

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