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Business Ratios and Formulas: A Comprehensive Guide, Third Edition

Book Description

A complete appraisal of analytical tools available to managers to assess performance

Required reading for anyone starting, running, or growing a business, Business Ratios and Formulas, Third Edition puts answers at the fingertips of business managers, with nearly 250 operational criteria and clear, easy-to-understand explanations that can be used right away. The Third Edition includes twenty new measurements.

  • Approximately 20 new measurements

  • Offers a comprehensive resource of nearly 250 operational criteria

  • An Appendix including a dictionary of accounting and finance terms

  • A thorough list of every ratio and formula, and how to compile and interpret that information

  • Also by Steven M. Bragg: Fast Close: A Guide to Closing the Books Quickly, Second Edition

An ideal tool for measuring corporate performance, this authoritative resource allows you to pick and choose the tools you need to best assess your organization's performance.

Table of Contents

  1. Cover
  2. Series
  3. Title Page
  4. Copyright
  5. Dedication
  6. Preface
  7. Acknowledgments
  8. CHAPTER ONE: Introduction
  9. CHAPTER TWO: Asset Utilization Measurements
    1. SALES TO WORKING CAPITAL RATIO
    2. SALES TO FIXED ASSETS RATIO
    3. SALES TO ADMINISTRATIVE EXPENSES RATIO
    4. SALES TO EQUITY RATIO
    5. SALES PER PERSON
    6. SALES BACKLOG RATIO
    7. SALES RETURNS TO GROSS SALES RATIO
    8. REPAIRS AND MAINTENANCE EXPENSE TO FIXED ASSETS RATIO
    9. ACCUMULATED DEPRECIATION TO FIXED ASSETS RATIO
    10. CAPITAL TO LABOR RATIO
    11. FRINGE BENEFITS TO WAGES AND SALARIES EXPENSE
    12. SALES EXPENSES TO SALES RATIO
    13. DISCRETIONARY COST RATIO
    14. INTEREST EXPENSE TO DEBT RATIO
    15. FOREIGN EXCHANGE RATIOS
    16. OVERHEAD RATE
    17. GOODWILL TO ASSETS RATIO
    18. OVERHEAD TO COST OF SALES RATIO
    19. INVESTMENT TURNOVER
    20. BREAK-EVEN POINT
    21. MARGIN OF SAFETY
    22. TAX RATE PERCENTAGE
  10. CHAPTER THREE: Operating Performance Measurements
    1. OPERATING ASSETS RATIO
    2. SALES TO OPERATING INCOME RATIO
    3. SALES MARGIN
    4. GROSS PROFIT PERCENTAGE
    5. GROSS PROFIT INDEX
    6. INVESTMENT INCOME PERCENTAGE
    7. OPERATING PROFIT PERCENTAGE
    8. OPERATING LEVERAGE RATIO
    9. NET INCOME PERCENTAGE
    10. CORE OPERATING EARNINGS
    11. PROFIT PER CUSTOMER VISIT
    12. PROFIT PER PERSON
    13. CORE GROWTH RATE
    14. QUALITY OF EARNINGS RATIO
  11. CHAPTER FOUR: Cash Flow Measurements
    1. CASH FLOW FROM OPERATIONS
    2. FREE CASH FLOW
    3. CASH FLOW RETURN ON SALES
    4. FIXED CHARGE COVERAGE
    5. EXPENSE COVERAGE DAYS
    6. CASH FLOW COVERAGE RATIO
    7. CASH RECEIPTS TO BILLED SALES AND PROGRESS PAYMENTS
    8. CASH TO CURRENT ASSETS RATIO
    9. CASH FLOW TO FIXED ASSET REQUIREMENTS
    10. CASH FLOW RETURN ON ASSETS
    11. CASH TO WORKING CAPITAL RATIO
    12. CASH REINVESTMENT RATIO
    13. CASH TO CURRENT LIABILITIES RATIO
    14. CASH FLOW TO DEBT RATIO
    15. REINVESTMENT RATE
    16. STOCK PRICE TO CASH FLOW RATIO
    17. DIVIDEND PAYOUT RATIO
  12. CHAPTER FIVE: Liquidity Measurements
    1. ACCOUNTS RECEIVABLE TURNOVER
    2. AVERAGE RECEIVABLE COLLECTION PERIOD
    3. DAYS DELINQUENT SALES OUTSTANDING
    4. DAYS SALES IN RECEIVABLES INDEX
    5. ACCOUNTS RECEIVABLE INVESTMENT
    6. ENDING RECEIVABLE BALANCE
    7. INVENTORY TO SALES RATIO
    8. INVENTORY TURNOVER
    9. INVENTORY TO WORKING CAPITAL RATIO
    10. LIQUIDITY INDEX
    11. ACCOUNTS PAYABLE DAYS
    12. ACCOUNTS PAYABLE TURNOVER
    13. CURRENT RATIO
    14. QUICK RATIO
    15. CASH RATIO
    16. SALES TO CURRENT ASSETS RATIO
    17. WORKING CAPITAL PRODUCTIVITY
    18. DAYS OF WORKING CAPITAL
    19. WEIGHTED WORKING CAPITAL
    20. DEFENSIVE INTERVAL RATIO
    21. CURRENT LIABILITY RATIO
    22. REQUIRED CURRENT LIABILITIES TO TOTAL CURRENT LIABILITIES RATIO
    23. WORKING CAPITAL TO DEBT RATIO
    24. RISKY ASSET CONVERSION RATIO
    25. NONCURRENT ASSETS TO NONCURRENT LIABILITIES RATIO
    26. SHORT-TERM DEBT TO LONG-TERM DEBT RATIO
    27. ALTMAN'S Z-SCORE BANKRUPTCY PREDICTION FORMULA
  13. CHAPTER SIX: Capital Structure and Solvency Measurements
    1. TIMES INTEREST EARNED
    2. CASH COVERAGE RATIO
    3. DEBT COVERAGE RATIO
    4. ASSET QUALITY INDEX
    5. ACCRUALS TO ASSETS RATIO
    6. TIMES PREFERRED DIVIDEND EARNED
    7. DEBT TO EQUITY RATIO
    8. FUNDED CAPITAL RATIO
    9. RETAINED EARNINGS TO STOCKHOLDERS' EQUITY
    10. PREFERRED STOCK TO TOTAL STOCKHOLDERS' EQUITY
    11. ISSUED SHARES TO AUTHORIZED SHARES
  14. CHAPTER SEVEN: Return on Investment Measurements
    1. NET WORTH
    2. BOOK VALUE PER SHARE
    3. TANGIBLE BOOK VALUE
    4. RETURN ON ASSETS EMPLOYED
    5. RETURN ON INFRASTRUCTURE EMPLOYED
    6. RETURN ON OPERATING ASSETS
    7. RETURN ON EQUITY PERCENTAGE
    8. RETURN ON COMMON EQUITY
    9. FINANCIAL LEVERAGE INDEX
    10. EQUITY GROWTH RATE
    11. EARNINGS PER SHARE
    12. PERCENTAGE CHANGE IN EARNINGS PER SHARE
    13. ECONOMIC VALUE ADDED
    14. EVA MOMENTUM
    15. RELATIVE VALUE OF GROWTH
    16. DIVIDEND PAYOUT RATIO
    17. DIVIDEND YIELD RATIO
  15. CHAPTER EIGHT: Market Performance Measurements
    1. INSIDER STOCK BUY-SELL RATIO
    2. INSTITUTIONAL CAPTURE RATE
    3. MARKET VALUE ADDED
    4. ENTERPRISE VALUE/EARNINGS RATIO
    5. STOCK OPTIONS TO COMMON SHARES RATIO
    6. COST OF CAPITAL
    7. SALES TO STOCK PRICE RATIO
    8. PRICE/EARNINGS RATIO
    9. CAPITALIZATION RATE
  16. CHAPTER NINE: Measurements for the Accounting/Finance Department
    1. PURCHASE DISCOUNTS TAKEN TO TOTAL DISCOUNTS
    2. PERCENTAGE OF PAYMENT DISCOUNTS MISSED
    3. TRANSACTIONS PROCESSED PER PERSON
    4. TRANSACTION ERROR RATE
    5. AVERAGE TIME TO ISSUE INVOICES
    6. AVERAGE EMPLOYEE EXPENSE REPORT TURNAROUND TIME
    7. PAYROLL TRANSACTION FEES PER EMPLOYEE
    8. TIME TO PRODUCE FINANCIAL STATEMENTS
    9. PERCENTAGE OF TAX FILING DATES MISSED
    10. PROPORTION OF PRODUCTS COSTED PRIOR TO RELEASE
    11. INTERNAL AUDIT SAVINGS TO COST PERCENTAGE
    12. INTERNAL AUDIT EFFICIENCY
    13. DEDUCTION TURNOVER
    14. BAD DEBT PERCENTAGE
    15. PERCENT OF RECEIVABLES OVER XX DAYS OLD
    16. ALLOWANCE EXHAUSTION RATE
    17. PERCENTAGE COLLECTED OF DOLLAR VOLUME ASSIGNED
    18. CASH COLLECTED PER AGING BUCKET
    19. COLLECTION EFFECTIVENESS INDEX
    20. BEST POSSIBLE DSO
    21. PARTIAL PAYMENT AGREEMENT PERCENTAGE
    22. PERCENT OF CASH APPLIED ON DAY OF RECEIPT
    23. AUTO CASH HIT RATE
    24. UNMATCHED RECEIPTS EXPOSURE
    25. COST OF CREDIT
    26. EARNINGS RATE ON INVESTED FUNDS
    27. BROKERAGE FEE PERCENTAGE
    28. BORROWING BASE USAGE PERCENTAGE
  17. CHAPTER TEN: Measurements for the Engineering Department
    1. BILL OF MATERIALS ACCURACY
    2. LABOR ROUTING ACCURACY
    3. IDEA KILL RATE
    4. PERCENTAGE OF NEW PRODUCTS INTRODUCED
    5. PERCENTAGE OF SALES FROM NEW PRODUCTS
    6. PERCENTAGE OF NEW PARTS USED IN NEW PRODUCTS
    7. PERCENTAGE OF EXISTING PARTS REUSED IN NEW PRODUCTS
    8. AVERAGE NUMBER OF DISTINCT PRODUCTS PER DESIGN PLATFORM
    9. PERCENTAGE OF PRODUCTS REACHING MARKET BEFORE COMPETITION
    10. RETURN ON INNOVATION INVESTMENT
    11. INTANGIBILITY INDEX
    12. SCIENCE LINKAGE INDEX
    13. RATIO OF ACTUAL TO TARGET COST
    14. WARRANTY CLAIMS PERCENTAGE
    15. TIME FROM DESIGN INCEPTION TO PRODUCTION
    16. PERCENTAGE OF FLOOR SPACE UTILIZATION
  18. CHAPTER ELEVEN: Measurements for the Human Resources Department
    1. EMPLOYEE TURNOVER
    2. AVERAGE TIME TO HIRE
    3. LATE PERSONNEL REQUISITIONS RATIO
    4. SENDOUTS PER HIRE
    5. INTERN HIRING PERCENTAGE
    6. RATIO OF SUPPORT STAFF TO TOTAL STAFF
    7. EMPLOYMENT COST EFFECTIVENESS
  19. CHAPTER TWELVE: Measurements for the Logistics Department
    1. PRODUCTION SCHEDULE ACCURACY
    2. ECONOMIC ORDER QUANTITY
    3. NUMBER OF ORDERS TO PLACE IN A PERIOD
    4. ECONOMIC PRODUCTION RUN SIZE
    5. RAW MATERIAL INVENTORY TURNS
    6. RAW MATERIAL CONTENT
    7. FINISHED GOODS INVENTORY TURNS
    8. OBSOLETE INVENTORY PERCENTAGE
    9. PERCENTAGE OF INVENTORY > XX DAYS OLD
    10. PERCENTAGE OF RETURNABLE INVENTORY
    11. EXCESS INVENTORY INDEX
    12. INVENTORY ACCURACY
    13. PERCENTAGE OF CERTIFIED SUPPLIERS
    14. ELECTRONIC DATA INTERCHANGE SUPPLIER PERCENTAGE
    15. DISTRIBUTION TURNOVER
    16. SUPPLIER FILL RATE
    17. ON-TIME PARTS DELIVERY PERCENTAGE
    18. PURCHASED COMPONENT DEFECT RATE
    19. INCOMING COMPONENTS CORRECT QUANTITY PERCENTAGE
    20. PERCENTAGE OF ACTUAL PAYMENTS VARYING FROM PURCHASE ORDER PRICE
    21. PERCENTAGE OF PURCHASE ORDERS ISSUED BELOW MINIMUM DOLLAR LEVEL
    22. PROPORTION OF CORPORATE CREDIT CARD USAGE
    23. PERCENTAGE OF RECEIPTS AUTHORIZED BY PURCHASE ORDERS
    24. FREIGHT AUDIT RECOVERY RATIO
    25. PICKING ACCURACY FOR ASSEMBLED PRODUCTS
    26. ORDER FILL RATE
    27. AVERAGE TIME TO SHIP
    28. ON-TIME DELIVERY PERCENTAGE
    29. DOCK-TO-DOCK TIME
    30. PERCENTAGE OF PRODUCTS DAMAGED IN TRANSIT
    31. PERCENTAGE OF SALES THROUGH DISTRIBUTORS
  20. CHAPTER THIRTEEN: Measurements for the Production Department
    1. CONSTRAINT PRODUCTIVITY
    2. TAKT TIME
    3. CONSTRAINT REWORK PERCENTAGE
    4. CONSTRAINT SCHEDULE ATTAINMENT
    5. CONSTRAINT UTILIZATION
    6. OPERATIONAL EQUIPMENT EFFECTIVENESS
    7. DEGREE OF UNBALANCE
    8. THROUGHPUT EFFECTIVENESS
    9. MANUFACTURING CRITICAL PATH TIME
    10. MANUFACTURING EFFICIENCY
    11. BREAK-EVEN PLANT CAPACITY
    12. MANUFACTURING EFFECTIVENESS
    13. PRODUCTIVITY INDEX
    14. UNIT OUTPUT PER DIRECT LABOR HOUR
    15. AVERAGE EQUIPMENT SETUP TIME
    16. UNSCHEDULED MACHINE DOWNTIME PERCENTAGE
    17. MEAN TIME BETWEEN FAILURES
    18. ACCEPTABLE PRODUCT COMPLETION PERCENTAGE
    19. WORK-IN-PROCESS TURNOVER
    20. WORK-IN-PROCESS TO STANDARD WORK-IN-PROCESS
    21. SCRAP PERCENTAGE
    22. FIRST-TIME-THROUGH YIELD
    23. WARRANTY CLAIMS PERCENTAGE
    24. MAINTENANCE EXPENSE TO FIXED ASSETS RATIO
    25. INDIRECT EXPENSE INDEX
    26. REORDER POINT
    27. ON-TIME DELIVERY RATIO
  21. CHAPTER FOURTEEN: Measurements for the Sales and Marketing Department
    1. MARKET SHARE
    2. CUSTOMER TURNOVER
    3. ADVERTISING VALUE EQUIVALENCY
    4. NET PROMOTER SCORE
    5. BROWSE-TO-BUY CONVERSION RATIO
    6. RECENCY
    7. DIRECT MAIL EFFECTIVENESS RATIO
    8. INBOUND TELEMARKETING RETENTION RATIO
    9. PROPORTION OF COMPLETED SALES TO HOME PAGE VIEWS
    10. QUOTE TO CLOSE RATIO
    11. PULL-THROUGH RATE
    12. SALES PER SALESPERSON
    13. SALES PRODUCTIVITY
    14. SALES EFFECTIVENESS
    15. SALES TREND PERCENTAGE BY PRODUCT LINE
    16. PRODUCT DEMAND ELASTICITY
    17. DAYS OF BACKLOG
  22. CHAPTER FIFTEEN: Measurement Analysis with an Electronic Spreadsheet*
    1. FINANCIAL STATEMENT PROPORTIONAL ANALYSIS
    2. FINANCIAL STATEMENT RATIO ANALYSIS
    3. AUTOMATED RATIO RESULT ANALYSIS
    4. LEVERAGE ANALYSIS
    5. TREND ANALYSIS
    6. FORECASTING
    7. CASH FLOW ANALYSIS
    8. CAPITAL ASSET ANALYSIS
    9. COMPOUNDING ANALYSIS
    10. INVESTMENT ANALYSIS
    11. RISK ANALYSIS
  23. Appendix: Measurement Summary
  24. Glossary
  25. About the Author
  26. Index