The total revenue of a company may sometimes be misleading because it may also include significant sales returns. Sales returns include the products which have been returned to the manufacturer after the sale was made. In some businesses, sales returns may be common due to the nature of the business, but significant and recurring returns can be a negative indication. High sales returns not only inflate the revenues shown on the books but also lower the credibility of the product in the market. Some of the problems indicated by high sales returns are low demand for the product in the market, malevolent intentions to escalate the short-term revenue, poor inventory management, and poor product quality of products or complaints.
The following companies have frequent and significant sales returns in their total revenues. These companies witness high returns from the customers or dealers, which range from 5 per cent to 20 per cent of the revenues. The reason behind such a situation should be investigated further before investing in these companies.
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