This is calculated by dividing Research & Development Expense by total sales or revenue.
This metric, also called R&D % of Total Revenue is useful to compare the effectiveness and efficiency of R&D expenditures between companies in the same industry.
R&D expenses differ greatly across different industries- the Drug Manufacturers generally have one of the highest R&D/Sales ratios. For example, Pfizer (PFE)'s R&D totaled to 16.5% of its revenue in 2008. Computer Software and hardware companies like Microsoft (MSFT) and Cisco Systems (CSCO) often have similarly high R&D/Sales ratios as well.