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ASSET UTILIZATION MEASUREMENT

Sales to Working Capital Ratio Annualized net sales (Accounts receivable + Inventory – Accounts payable)

Sales to Fixed Assets Ratio Annualized net sales Total fixed assets

Sales to Administrative Expenses Ratio Annualized net sales Total general and administrative expenses

Sales to Equity Ratio Annual net sales Total equity

Sales per Person Annualized revenue Total direct labor full-time equivalents

Sales Backlog Ratio Total direct labor full-time equivalents Sales

Sales Returns to Gross Sales Ratio Total sales returns Gross sales

Repairs and Maintenance Expense to Fixed Assets Ratio Total repairs and maintenance expense Total fixed assets before depreciation

Accumulated Depreciation to Fixed Assets Ratio Accumulated depreciation Total fixed assets

Fringe Benefits to Wages and Salaries Expense Life insurance + Medical insurance + Pension funding expense + Other benefits
Wages + Salaries + Payroll taxes
Sales Expenses to Sales Ratio Sales salaries + Commissions + Sales travel expenses + Other sales expenses
Sales
Discretionary Cost Ratio Discretionary costs Sales

Interest Expense to Debt Ratio Interest expense (Short-term debt) + (Long-term debt)

Foreign Exchange Ratio Foreign currency gains and losses Net Income

Overhead Rate Total overhead expense Direct labor or Total Machine Hours

Goodwill to Assets Ratio Unamortized goodwill Total assets

Overhead to Cost of Sales Ratio Total overhead expenses Cost of goods sold

Investment Turnover Sales Stockholders’ equity + Long-term liabilities

Break-Even Point Total operating expenses Average gross margin percentage

Margin of Safety Current sales level – Break-even point Current sales level
Tax Rate Percentage Income tax paid Before-tax income
OPERATING PERFORMANCE MEASUREMENTS

Operating Assets Ratio Assets used to create revenue Total assets

Sales to Operating Income Ratio Operating income (Net sales) – (Investment income)

Sales Margin Gross margin – Sales expenses Gross sales

Gross Profit Percentage Revenue – (Overhead + Direct materials + Direct labor)


Revenue

Gross Profit Index Gross profit in period two ÷ Sales in period two
Gross profit in period one ÷ Sales in period one
Investment Income Percentage Dividend income + Interest income Carrying value of investments

Operating Profit Percentage Sales – (Cost of goods sold + Sales, general, and administrative expenses)
Sales
Operating Leverage Ratio Sales – Variable expenses
Operating income
Net Income Percentage Net income Revenue

Core Operating Earnings + Employee stock option expenses


+ Restructuring charges from ongoing operations
+ Pension fund costs
+ Purchased R&D expenses
+ Asset write-downs
– Goodwill impairment charges
– Gains/losses from the sale of assets
– Pension gains
– Merger and acquisition-related expenses
– Litigation and insurance settlement costs and proceeds
– Unrealized gains from hedging activities

Profit per Customer Visit Net profits Total customer visits

Profit per Person Net profit Total full-time equivalents

Quality of Earnings Ratio Earnings – Cash from operations (Beginning assets + Ending assets) / 2
CASH FLOW MEASUREMENTS

Cash Flow from Operations Income from operations + Noncash expenses – Noncash sales
Income from operations

Cash Flow Return on Sales Net income + Noncash expenses – Noncash sales Total sales

Fixed Charge Coverage Fixed expenses + Fixed payments Cash flow from operations

Expense Coverage Days Cash + Short-term marketable securities + Accounts receivable


Annual cash expenditures / 360

Cash Flow Coverage Ratio Total debt payments + Dividend payments + Capital expenditures
Net income + Noncash expenses – Noncash sales

Cash Receipts to Billed Sales and Progress Payments Cash receipts Billed sales + Billed progress payments

Cash to Current Assets Ratio Cash + Short-term marketable securities Current assets

Cash Flow to Fixed Asset Requirements Net income + Noncash expenses – Noncash sales – Dividends – Principal payments
Budgeted fixed asset purchases
Cash Flow Return on Assets Net income + Noncash expenses – Noncash sales
Total assets
Cash to Working Capital Ratio Cash + Short-term marketable securities
Current assets – Current liabilities
Cash Reinvestment Ratio Increase in fixed assets + Increase in working capital
Net income + Noncash expenses – Noncash sales – Dividends
Cash to Current Liabilities Ratio Cash + Short-term marketable securities
Current liabilities
Cash Flow to Debt Ratio Net income + Noncash expenses – Noncash sales
Debt + Lease obligations
Stock Price to Cash Flow Ratio Stock price Number of shares outstanding
Earnings before interest, taxes, depreciation and amortization
Dividend Payout Ratio Total dividend payments
Net income + Noncash expenses – Noncash sales

LIQUIDITY MEASUREMENTS

Accounts Receivable Turnover Annualized credit sales


Average accounts receivable + Notes payable by customers
Average Receivable Collection Period Average accounts receivable
Annual sales / 365

Days Delinquent Sales Outstanding Annualized credit sales from delinquent accounts ÷ Ave. delinquent accounts receivable
365
Days Sales in Receivables Index Accounts receivable in period two ÷ Sales in period two
Accounts receivable in period one ÷ Sales in period one
Accounts Receivable Investment Average days to payment ÷ 365
x Annual credit sales x (1 – Gross margin %) x %Cost of capital
Ending Receivable Balance Average receivable collection period
x (Sales forecast for period ÷ Days in period)
Inventory to Sales Ratio Sales Inventory

Inventory Turnover Cost of goods sold Inventory


Or 365 (Cost of goods sold ÷ Inventory)

Inventory to Working Capital Ratio Inventory


Accounts receivable + Inventory – Accounts payable
Liquidity Index (Accounts receivable x Days to liquidate) + (Inventory x Days to liquidate)
(Accounts receivable + Inventory)
Accounts Payable Days Accounts payable (Purchases ÷ 365)

Accounts Payable Turnover Total purchases Ending accounts payable balance

Current Ratio Current assets Current liabilities

Quick Ratio Cash + Marketable securities + Accounts receivable


Current liabilities
Cash Ratio Cash + Short-term marketable securities
Current liabilities
Sales to Current Assets Ratio Sales Current assets

Working Capital Productivity Annual sales Working capital

Days of Working Capital (Accounts receivable + Inventory – Accounts payable)


(Net sales ÷ 365)

Current Liability Ratio Current liabilities Total liabilities

Required Current Liabilities to Total Current Liabilities Ratio Current liabilities with required payment dates Total current liabilities

Working Capital to Debt Ratio Cash + Accounts receivable + Inventory – Accounts payable
Debt
Risky Asset Conversion Ratio Cost of assets with minimal cash conversion value Total assets

Noncurrent Assets to Noncurrent Liabilities Ratio Noncurrent assets Noncurrent liabilities

Short-term Debt to Long-term Debt Ratio Total short-term debt Total long-term debt

CAPITAL STRUCTURE AND SOLVENCY MEASUREMENTS

Times Interest Earned Average cash flow Average interest expense

Debt Coverage Ratio Earnings before interest and taxes


Interest + (Scheduled principal payments ÷ (1- Tax rate))
Asset Quality Index 1 – [ (Current assets in period two + Net fixed assets in period two)] ÷ Total assets in period two
1 – [ (Current assets in period one + Net fixed assets in period one] ÷ Total assets in period one

Accruals to Assets Ratio Change in working capital – Change in cash – Change in depreciation
Change in total assets

Times Preferred Dividend Earned Net income Preferred dividend


Debt to Equity Ratio Debt Equity
Funded Capital Ratio Stockholders’ equity + Long-term debt Fixed assets
Retained Earnings to Stockholders’ Equity Retained earnings Total stockholders’ equity
Preferred Stock to Total Stockholders’ Equity Preferred stock Total stockholders’ equity
Issued Shares to Authorized Shares Total issued shares Total authorized shares
RETURN ON INVESTMENT MEASUREMENTS

Net Worth Total assets – Total liabilities


or Total assets – Total liabilities – Preferred stock dividends
Book Value per Share Total equity – Cost to liquidate preferred stock
Total number of common shares outstanding
Book Value per specific share Liquidation value of preferred stock + Unpaid preferred dividends
Number of preferred shares outstanding

Tangible Book Value Book Value – (Goodwill + Other intangibles)


Return on Assets Employed Net profit Total assets
Return on Infrastructure Employed (IT) Before-tax earnings Information technology operating expenses
Return on Operating Assets Net income Assets used to create revenue
Return on Equity Percentage Net income Total equity
Return on Common Equity Net income – Preferred stock dividends Common stockholders’ equity
Financial Leverage Index Return on equity Return on assets
Equity Growth Rate Net income – Common stock dividends – Preferred stock dividends
Beginning common stockholders’ equity
Earnings per Share Net income – Dividends on preferred stock
Number of outstanding common shares + Common stock equivalents
Percentage Change in Earnings per Share Incremental change in earnings per share Earnings per share from previous period
Economic Value Added (Net investment) (Actual return on investment – Percentage cost of capital)
Relative Value of Growth Sustainable cash flow
(Weighted average cost of capital) – (Investors’ growth expectations) – (1%)
Dividend Payout Ratio Dividend per share Earnings per share
Dividend Yield Ratio Dividend per share Market price per share

MARKET PERFORMANCE MEASUREMENTS

Insider Stock Buy-Sell Ratio Number of stock sale transactions by insiders


Number of stock purchase transactions by insiders
Market Value Added (Number of common shares outstanding x Share price) + (Number of preferred
shares outstanding x Share price) – (Book value of invested capital)
Enterprise Value/Earnings Ratio (Total shares x Stock price) + Debt – Cash – Marketable securities
Net income – Interest expense
Stock Options to Common Shares Ratio Total stock options Total common shares outstanding
Cost of Capital Interest expense x (1 – Tax rate)
Amount of debt – Debt acquisition fees + Premium on debt – Discount on debt
Sales to Stock Price Ratio Annual net sales Average common stock price
Price/Earnings Ratio Average common stock price Net income per share
Capitalization Rate Earnings per share Market price per share

Measurements for the Accounting/Finance Department

Purchase Discounts Taken to Total Discounts Total purchase discounts taken Total economical discounts available
Percentage of Payment Discounts Missed Number of payment discounts missed
Total number of payment discounts available
Transactions Processed per Person Total number of transactions processed
Number of full-time equivalents required to complete transactions
Transaction Error Rate Number of errors Total number of transactions processed
Average Time to Issue Invoices Sum of invoice dates – Sum of shipment dates
Number of invoices issued
Average Employee Expense Report Turnaround Time Date of payment to employees – Date of expense report receipt
Payroll Transaction Fees per Employee Total payroll outsourcing fee per payroll
Total number of employees itemized in payroll
Time to Produce Financial Statements Financial statement issue date – First day of the month following the reporting month
Percentage of Tax Filing Dates Missed Total number of tax returns filed late
Total number of tax returns filed
Proportion of Products Costed Prior to Release Number of products costed prior to release Total number of products released
Internal Audit Savings to Cost Percentage Internal audit recommended savings Internal audit expense
Bad Debt Percentage Total bad debt dollars recognized Total outstanding accounts receivable
Percent of Receivables over XX Days Old Dollar amount of outstanding receivables > XX days old
Total dollars of outstanding receivables
Percentage Collected of Dollar Volume Assigned Cash received from collection agency
Total accounts receivable assigned to collection agency
Cost of Credit Discount % ÷ (100 – Discount %) x (360/Full allowed payment days – Discount days)
Earnings Rate on Invested Funds Interest earned + Increase in market value of securities
Total funds invested
Brokerage Fee Percentage Bank / broker transaction fees charged Total funds invested
MEASUREMENTS FOR THE HUMAN RESOURCES DEPARTMENT

Employee Turnover Number of Full Time Equivalent employees who resigned


(Total FTE employees at beg of period + Total FTE employees at end of period) ÷ 2

MEASUREMENTS FOR THE LOGISTICS DEPARTMENT

Production Schedule Accuracy Number of scheduled jobs completed Number of jobs scheduled for completion

Economic Order Quantity

Number of Orders to Place in a Period Total usage in units EOQ


Raw Material Inventory Turns (Raw material dollars consumed ÷ Raw material inventory dollars on hand) x 12
Raw Material Content Raw material dollars sold Sales
Finished Goods Inventory Turns (Finished goods dollars consumed ÷ Finished goods inventory dollars on hand) x12
Obsolete Inventory Percentage Cost of inventory items with no recent usage Total inventory cost
Percentage of Inventory > XX Days Old Dollars of inventory > XX days old Total dollars of inventory
Percentage of Returnable Inventory Dollars of returnable inventory Total dollars of inventory
Inventory Accuracy Number of accurate test items Total number of items sampled
Percentage of Certified Suppliers Number of certified production suppliers Total number of production suppliers
Order Fill Rate Number of customer orders completely filled by promised ship date
Number of customer orders having promised ship dates within the measurement period
Average Time to Ship Delivery date – Date order was sent to shipping area
On-Time Delivery Percentage Required delivery date – Actual delivery date
Percentage of Products Damaged in Transit Damage-related customer complaints Number of orders shipped
Percentage of Sales through Distributors Total dollars of sales to distributors Total dollars of sales

MEASUREMENTS FOR THE PRODUCTION DEPARTMENT

Constraint Productivity Number of units produced per hour Number of hours worked
Takt Time Operating time Required quantity
Manufacturing Efficiency Current cycle time Value-added time
Work-in-Process Turnover Annual cost of goods sold Total work-in-process
Warranty Claims Percentage Total number of warranty claims received Total number of products sold