What are Organic Sales?

The term organic sales can make you confused by making you think it is something related to sales of products of the company. However this is not the case as organic sales means the streams of revenue that are generated within the business itself without having some external operations or external help. Organic sale generation is directly related to the internal operations of the business. The end product of a company’s internal processes can be termed as organic sales. Another term used for organic sales is organic sales growth that may be defined as the rate with which a company tends to increase its sales internally. The metric of organic sales shows the degree of efficiency to which a company can utilize its internal resources to enhance its sales and profitability.

While calculating organic sales we exclude the profit or growth from external resources such as expansion of a company through mergers and acquisitions because these actions do not generate profit or growth within the company. Growth that involves external factors is not organic growth so it cannot be considered as organic sales. One thing that must be kept in mind that while calculating the organic sales growth percentage items that are beyond the control of management must be excluded. These items may include foreign exchange rates of currency, divestiture activities and other similar factors. Another aspect of organic sales is that it is not a GAAP recommended measure as it the internal measurement of profit of a business or a company.

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