Employee hours VS. Gross Sales??
Investment analysts use a variety of key ratios, such as return on equity , return on assets , and price-earnings ratio (, to gauge a company's
well being. One number that doesn't get a lot of attention is the
sales-per-employee ratio. While it does have its limitations, this
ratio does give investors some sense of a company's productivity and
financial health.
What Is the Sales-per-Employee Ratio?
The name
indicates how the sales/employee ratio is calculated: a company's
annual sales divided by its total employees. Annual sales and employee
numbers are easily located in published statements and annual reports.
The sales-per-employee ratio provides a broad indication of how
expensive a company is to run. It can be especially insightful when
measuring the efficiency of businesses such as banks, retailers,
consultants, software companies and media groups. "People businesses" lend themselves to the sales per employee ratio.
Interpreting the ratio is fairly straightforward: companies with
higher sales-per-employee figures are generally considered more
efficient than those with lower figures. A higher sales-per-employee
ratio indicates that the company can operate on low overhead costs, and
therefore do more with less employees, which often translates into
healthy profits
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