CHAPTER THREE
Operating Performance Measurements
THIS CHAPTER ADDRESSES MEASUREMENTS that can be used to describe an organization's operating performance in such areas as sales, gross margins, investment income, operating profit, and net profit. It does not address the measures for operating performance of individual departments, which are covered in Chapters 9 through 14. The measurements covered in this chapter are:
| Operating Assets Ratio Sales to Operating Income Ratio Sales Margin Gross Profit Percentage Gross Profit Index Investment Income Percentage Operating Profit Percentage | Operating Leverage Ratio Net Income Percentage Core Operating Earnings Profit per Customer Visit Profit per Person Core Growth Rate Quality of Earnings Ratio |
OPERATING ASSETS RATIO
Description: This measurement is the only one in this chapter that is based solely on information in the balance sheet. It is designed for use by managers to determine which assets can be safely eliminated from a company without impairing its operational capabilities. Its intent is to focus management attention on assets that are not generating a return on investment so that they can be eliminated.
Formula: Divide the dollar value of all assets used in the revenue creation process by the total amount of assets. Both of these numbers should be recorded at their gross values, prior to any depreciation deduction. The calculation can also include accounts receivable and inventory. The formula is:
Example: The Matrix ...
