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Key Ratios
- Profit as % of Capital Employed
- Profit as % of Sales
- Sales/Capital Employed
- Sales : Fixed Assets
- Sales : Stocks
- Sales per Employee
- Profit per Employee
How ratios can help - Diagnosis, Control, Forward Planning
Achieving the optimum balance
- Maximization of profitable sales
- Minimization of marketing costs
- Minimization of assets used
How to improve the key ratios
- Increase sales without a corresponding increase in costs or
assets
- If expansion is not possible, reduce costs or assets without
a corresponding reduction in sales
- Improve overall contribution margin by increasing ratio of
sales of high : low margin lines
- Review of product range - today's/yesterday's/tomorrow's
bread winners
Subsidiary
ratios - May be useful to break ratios down further e.g. office costs, etc
As a rule
It is better to have half a dozen ratios which are easily
obtained, understood, considered and acted upon than many
which are a burden to prepare and overwhelm.
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