THIS APPENDIX CONTAINS ALL the measurements described in Chapters 2

Transcription

1 Business Ratios and s: A Comprehensive Guide, Third Edition By Steven M. Bragg Copyright 2012 by John Wiley & Sons, Inc. Appendix Measurement Summary THIS APPENDIX CONTAINS ALL the measurements described in Chapters 2 through 14. It is intended to be a quick reference for the reader who needs to find a formula as soon as possible. Refer back to the related discussion in the main body of the book, however, for comments on alternative formula derivations or cautions on their use that may be pertinent. The following measurements are listed in the same order as they are found within each chapter, and the name of each measurement and its derivation are shown. In some cases, multiple variations on the same measurement are shown. Asset Utilization Measurements Sales to working capital ratio Sales to fixed assets ratios Annualized net sales (Accounts receivable + Inventory Accounts payable) Annualized net sales Total fixed assets Annualized net sales Total fixed assets before accumulated depreciation Sales to administrative expenses ratio Sales to equity ratio Sales per person Sales backlog ratio Annualized net sales Total general and administrative expenses Annual net sales Total equity Annualized revenue Total full-time equivalents Backlog of orders received Sales Total backlog Annual sales/360 Days 313

2 314 Business Ratios and s Sales returns to gross sales ratio Repairs and maintenance expense to fixed assets ratio Accumulated depreciation to fixed assets ratio Capital to labor ratio Fringe benefits to wages and salaries expense Total sales returns Gross sales Total repairs and maintenance expense Total fixed assets before depreciation Accumulated depreciation Total fixed assets Tangible fixed assets Accumulated depreciation Compensation + Payroll taxes + Employee benefits 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 Interest expense to debt ratio Foreign exchange ratios Overhead ratios Goodwill to assets ratio Discretionary costs Sales Interest expense (Short-term debt) + (Long-term debt) Foreign currency gains and losses Net income Foreign currency gains and losses Total sales Total overhead expense Direct labor Total overhead expense Total machine hours Unamortized goodwill Total assets

3 Appendix: Measurement Summary 315 Overhead to cost of sales ratios Total overhead expenses Cost of goods sold Total overhead expenses Direct materials + Direct labor Total overhead expense Direct materials Investment turnover Break-even point Sales Stockholders equity + Long-term liabilities Total operating expenses Average gross margin percentage Total operating expenses (Depreciation + Amortization + Other noncash 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 Income tax expense Before-tax income Operating Performance Measurements Operating assets ratio Sales to operating income ratio Sales margin Assets used to create revenue Total assets Operating income (Net sales) (Investment income) Gross margin Sales expenses Gross sales Gross profit percentage Revenue (Overhead + Direct materials + Direct labor) Revenue Revenue Direct materials Revenue

4 316 Business Ratios and s 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 Net income percentage Core operating earnings Profit per customer visit Profit per person Sales Variable expenses Operating income Net income Revenue + 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 Net profits Total customer visits Net profit Total full-time equivalents Core growth rate (Current annual revenue Annual revenue 5 years ago Acquired revenue Revenue recognition changes) / Annual revenue five years ago 5 Average annual price increase

5 Appendix: Measurement Summary 317 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 Free cash flow Cash flow from operations Cash flow return on sales Fixed charge coverage Expense coverage days Operating cash flow Working capital changes Capital expenditures Dividends Net income + Noncash expenses Noncash sales Net income Net income + Noncash expenses Noncash sales Total sales Fixed expenses + Fixed payments Cash flow from operations 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 to current assets ratio Cash receipts Billed sales + Billed Cash + Short-term marketable securities Current assets Cash flow to fixed asset requirements Net income + Noncash expenses Noncash sales Budgeted fixed asset purchases

6 318 Business Ratios and s Net income + Noncash expenses Noncash sales Dividends Principal payments Budgeted fixed asset purchases Cash flow return on assets Cash to working capital ratio Net income + Noncash expenses Noncash sales Total assets 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 flow to debt ratios Cash + Short-term marketable securities Current liabilities Net income + Noncash expenses Noncash sales Debt + Lease obligations Net income + Noncash expenses Noncash sales Total long-term debt payments for the period Reinvestment ratio Capital expenditures + Acquisitions + Research & development Earnings before interest, taxes, depreciation and amortization Stock price to cash flow ratio Dividend payout ratio (Stock price) (Number of shares outstanding) Earnings before interest, taxes, depreciation and amortization Total dividend payments Net income + Noncash expenses Noncash sales

7 Appendix: Measurement Summary 319 Liquidity Measurements Accounts receivable turnover Average receivable collection period Days delinquent sales outstanding Days sales in receivables index Annualized credit sales Average accounts receivable + Notes payable by customers Average accounts receivable Annual sales / / Annualized credit sales from delinquent accounts Average delinquent accounts receivable 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 360 Days Annual credit sales (1 Gross margin %) Cost of capital Ending receivable balance Inventory to sales ratio Inventory turnover ratios Average receivable collection period Sales forecast for period Days in period Sales Inventory Cost of goods sold Inventory 365 (Cost of goods sold / Inventory) Direct materials Raw materials inventory Inventory to working capital ratio Inventory Accounts receivable + Inventory Accounts payable

8 320 Business Ratios and s Liquidity index (Accounts receivable Days to liquidate) + (Inventory Days to Liquidate) Accounts receivable + Inventory Accounts payable days Accounts payable turnover Current ratio Quick ratio Cash ratio Sales to current assets ratio Working capital productivity Accounts payable Purchases / 365 Total purchases Ending accounts payable balance Current assets Current liabilities Cash + Marketable securities + Accounts receivable Current liabilities Cash + Short-term marketable securities Current liabilities Sales Current assets Annual sales Working capital Days of working capital (Accounts receivable + Inventory Accounts payable) Net Sales / 365 Weighted working capital (Current year ending working capital) (Last year ending working capital (1 + % change in annual revenue)) Defensive interval ratio Cash + Marketable securities + Accounts receivable Expected daily operating expenses Current liability ratio Required current liabilities to total current liabilities ratio Current liabilities Total liabilities Current liabilities with required payment dates Total current liabilities

9 Appendix: Measurement Summary 321 Working capital to debt ratio Cash + Accounts receivable + Inventory Accounts payable Debt Risky asset conversion ratio Noncurrent assets to noncurrent liabilities ratio Short-term debt to long-term debt ratio Cost of assets with minimal cash conversion value Total assets Noncurrent assets Noncurrent liabilities Total short-term debt Total long-term debt Altman s Z-score bankruptcy prediction formula Capital Structure and Solvency Measurements (Operating income / Total assets) (Sales / Total assets) (Market value of common stock + Preferred stock) / (Total liabilities) (Working capital / Total assets) (Retained earnings / Total assets) 1.4 Times interest earned Cash coverage ratio Debt coverage ratio Average cash flow Average interest expense Earnings before interest and taxes + Non-cash expenses Interest expense Earnings before interest and taxes Scheduled principal payments Interest + (1 Tax rate)

10 322 Business Ratios and s Asset quality index Current assets in period two + Net fixed assets in period two 1 Total assets in period two Current assets in period one + Net fixed assets in period one 1 Total assets in period one Accruals to assets ratio Change in working capital Change in cash Change in depreciation Times preferred dividend earned Debt to equity ratio Change in total assets Net income Preferred dividend Debt Equity Funded capital ratio Stockholders equity + Long-term debt Fixed assets Retained earnings to stockholders equity Preferred stock to total stockholders equity Issued shares to authorized shares Return on Investment Measurements Retained earnings Total stockholders equity Preferred stock Stockholders equity Issued shares + Stock options + Stock warrants + Convertible securities Total authorized shares Net worth Total assets Total liabilities Preferred stock dividends Total outstanding common shares Book value per share Total equity Cost to liquidate preferred stock Total number of common shares outstanding

11 Appendix: Measurement Summary 323 Tangible book value Book value (Goodwill + Other intangibles) Return on assets employed Return on infrastructure employed Return on operating assets Return on equity percentage Return on common equity Financial leverage index Equity growth rate Earnings per share Percentage change in earnings per share Economic value added EVA Momentum Net profit Total assets Before-tax earnings Information technology operating expenses Net income Assets used to create revenue Net income Total equity Net income Preferred stock dividends Common stockholders equity Return on equity Return on assets Net income Common stock dividends Preferred stock dividends Beginning common stockholders equity Net income Dividends on preferred stock Number of outstanding common shares + Common stock equivalents Incremental change in earnings per share Earnings per share from previous period Net investment (Actual return on investment Percentage cost of capital) Ending EVA Beginning EVA Annualized sales in preceding period

12 324 Business Ratios and s Relative value of growth Dividend payout ratio Dividend yield ratio Sustainable cash flow Weighted average cost of capital Investors growth expectations 1% Current revenue 1% (1 Tax rate %) (Weighted average cost of capital) (Investor s growth expectations) Dividend per share Earnings per share Dividend per share Market price per share Market Performance Measurements Insider stock buy-sell ratio Institutional capture rate Market value added Number of stock sale transactions by insiders Number of stock purchase transactions by insiders Total trading volume/absolute number of shares bought or sold by institutional investors (Number of common shares outstanding Share price) + (Number of preferred shares outstanding Share price) (Book value of invested capital) Enterprise value/earnings ratio (Total shares Stock price) + Debt Cash Marketable securities Net income Interest expense Stock options to common shares ratios Total stock options Total common shares outstanding Total vested stock options Total common shares outstanding

13 Appendix: Measurement Summary 325 Total vested options in the money Total common shares outstanding Cost of capital Interest expense (1 Tax rate) Amount of debt Debt acquisition fees + Premium on debt Discount on debt + Interest expense Amount of preferred stock + Risk-free return + (Beta (Average stock return Risk-free return)) Sales to stock price ratio Price/earnings ratio Capitalization rate Annual net sales Average common stock price Average common stock price Net income per share Earnings per share Market price per share Measurements for the Accounting/Finance Department Purchase discounts taken to total discounts Percentage of payment discounts missed Transactions processed per person Transaction error rate Total purchase discounts taken Total purchases Number of payment discounts missed Total number of payment discounts available Total number of transactions processed Number of full-time equivalents required to complete transactions Number of errors Total number of transactions processed

14 326 Business Ratios and s Average time to issue invoices Sum of invoice dates Sum of shipment dates Number of invoices issued Average employee expense report Payroll transaction fees per employee Time to produce financial statements Percentage of tax filing dates missed Proportion of products costed prior to release Internal audit savings to cost percentage Internal audit efficiency Date of payment to turnaround time employees Date of expense report receipt Total payroll outsourcing fee per payroll Total number of employees itemized in payroll Financial statement issue date First day of the month Total number of tax returns fi l e d l a t e Total number of tax returns filed Number of products costed prior to release Total number of products released Internal audit recommended savings Internal audit expense Number of internal audits completed Number of internal audits planned Deduction turnover Beginning unresolved deductions + New deductions received Ending unresolved deductions Bad debt percentage Total bad debt dollars recognized Total outstanding accounts receivable Total bad debt dollars recognized Total credit sales

15 Appendix: Measurement Summary 327 Percent of receivables over XX days old Dollar amount of outstanding receivables > XX days old Total dollars of outstanding receivables Allowance exhaustion rate Allowance for doubtful accounts Subsequent write-offs Percentage collected of dollar volume assigned Cash received from collection agency Total accounts receivable assigned to collection agency Collection effectiveness index Beginning receivables + Credit sales Ending total receivables 100 Beginning receivables + Credit sales Ending current receivables Best possible DSO Partial payment agreement percentage Percent of cash applied on day of receipt Auto cash hit rate Unmatched receipts exposure Current accounts receivable 365 days Annual credit sales Total of recurring promises to pay Total postdated checks Total overdue accounts receivable Dollars of cash receipts applied on day of receipt Total dollars of incoming cash on day of receipt Number of customer payments automatically applied Total number of customer payments received Total balance in unmatched receipts suspense account Total accounts receivable balance Cost of credit Discount % / (100 Discount %) (360 / (Full allowed payment days Discount days))

16 328 Business Ratios and s Earnings rate on invested funds Brokerage fee percentage ratios Interest earned + Increase in market value of securities Total funds invested Bank or broker transaction fees charged Total funds invested Bank or broker transaction fees charged Number of bank or broker transactions processed Borrowing base usage percentage Amount of debt outstanding (Accounts receivable Allowable percentage) + (Inventory Allowable percentage) Measurements for the Engineering Department Bill of materials accuracy Labor routing accuracy Idea kill rate Percentage of new products introduced Percentage of sales from new products Percentage of new parts used in new products Number of accurate parts listed in bill of materials Total number of parts listed in bill of materials Number of correct machine times or machine codes Total number of routing line items Number of ideas killed during period Average number of ideas outstanding during period Number of new products introduced in the period Number of products available at the beginning of the period Sales from new products Total sales Number of new parts in bill of materials Total number of parts in bill of materials

17 Appendix: Measurement Summary 329 Percentage of existing parts reused Average number of distinct products per design platform Percentage of products reaching market before competition Return on innovation investment Intangibility index Science linkage index Ratio of actual to target cost Warranty claims percentage Time from design inception to production Percentage of floor space utilization Number of approved parts in new products bill of materials Total number of parts in bill of materials Total number of distinct products Total number of design platforms Number of products released before competition Total number of products released Number of products released on schedule Total number of products released Net profit from new products R&D and new product launch costs for new products Total annual research and development expense Total annual capital spending Total research paper references in issued patents Number of patents issued Total of actual product costs Total of target costs Total number of warranty claims received Total number of products sold (Completed design sign-off date) (Design start date) Amount of floor space used for machinery, operator, and materials movement Total floor space

18 330 Business Ratios and s Measurements for the Human Resources Department Employee turnover Ratio of support staff to total staff Intern hiring rate Average time to hire Late personnel requisitions ratio Sendouts per hire Employment cost effectiveness Number of FTE employees who resigned (Total FTE employees at beginning of period + Total FTE employees at end of period) / 2 (Beginning FTE support staff + Ending FTE support staff) / 2 (Beginning FTE employees + Ending FTE employees) / 2 Number of intern job offers accepted Number of interns working for the company during the preceding year Sum for all completed job searches [Job application date Job application date] Number of completed job searches Number of personnel requisitions open more than XX days Number of personnel requisitions opened during past three months Number of applicants hired Number of applicants sent by recruiting firm Initial investment + IPO proceeds Headcount 10 years later Measurements for the Logistics Department Production schedule accuracy Number of scheduled jobs completed Number of jobs scheduled for completion

19 Appendix: Measurement Summary 331 Economic order quantity Number of orders to place in a period Economic production run size Raw material inventory turns Raw material content Finished goods inventory turns Obsolete inventory percentage Percentage of inventory > XX days old Percentage of returnable inventory Excess inventory index Inventory accuracy Percentage of certified suppliers EDI supplier percentage The root of ((2 Total usage in units Cost per order) / Carrying cost per unit) Total usage in units Economic order quantity The root of ((2 Total unit demand Run setup cost) / Carrying cost per unit) (Raw material dollars consumed / Raw material inventory dollars on hand) 12 Raw material dollars sold Sales (Finished goods dollars consumed / Finished goods inventory dollars on hand) 12 Cost of inventory items with no recent usage Total inventory cost Dollars of inventory > XX days old Total dollars of inventory Dollars of returnable inventory Total dollars of inventory (Disposal inventory Price erosion factor) + Inventory holding costs Number of accurate test items Total number of items sampled Number of certified production suppliers Total number of production suppliers Number of suppliers with EDI linkages Total number of suppliers

20 332 Business Ratios and s Distribution turnover Supplier fill rate On-time parts delivery percentage Purchased component defect rate Incoming components correct quantity Percentage of actual payments varying from purchase order Percentage of purchase orders issued below minimum dollar level Proportion of corporate credit card usage Percentage of receipts authorized by purchase orders Freight audit recovery ratio Picking accuracy for assembled products Dollars of manufacturing purchases per year Dollar value of incoming inventory Number of purchase order line items filled Total purchase order line items issued (Actual arrival date) (Requested arrival date) Number of rejected components Total number of components received Quantity of orders with percentage correct parts quantity delivered Total quantity of orders delivered 100% Dollar total of excess costs price over purchase order costs Total of all purchase order costs Number of purchase orders issued below minimum dollar level Total number of purchase orders issued Number of credit card purchase transactions Total number of purchase transactions Receipt line items authorized by open purchase orders Total receipt line items Total freight billings refund Total freight billings Number of quantity errors + Number of part errors Total number of product kits sampled

21 Appendix: Measurement Summary 333 Order fill rate Average time to ship Number of customer orders completely filled by promised ship date Number of customer orders having promised ship dates within the measurement period (Delivery date) (Date order was sent to shipping area) On-time delivery percentage Required delivery date Actual delivery date Dock-to-dock time Units in production inventory Units shipped in the period / Production hours in the period Percentage of products damaged in transit Percentage of sales through distributors Measurements for the Production Department Constraint productivity Takt time Constraint rework percentage Damage-related customer complaints Number of orders shipped Total dollars of sales to distributors Total dollars of sales Number of units produced per hour Number of hours worked Operating time Required quantity Rework hours used in constraint operation Total hours of constraint Constraint schedule attainment Constraint utilization Operational equipment effectiveness Part hours produced + Rework hours Reduction in actual hours from standard Part hours scheduled Actual hours used in constraint operation Total constraint hours available Availability Performance efficiency Quality

22 334 Business Ratios and s Degree of unbalance Maximum capacity of the work cell bottleneck operation Maximum capacity of the next most restrictive work cell operation Throughput effectiveness Gross revenue Variable expenses Operating expenses Manufacturing critical path time Order receipt date and time Customer delivery date and time Manufacturing efficiency Break-even plant capacity Manufacturing effectiveness Productivity index Current cycle time Value-added time Current utilization level total fixed costs Sales Variable expenses Throughput hours shipped Constraint hours consumed Total change in output quantities Total change in input quantities Unit output per direct labor hour Total units completed + Total unit equivalents Total carryforward unit equivalents Total number of direct labor hours Average equipment setup time Start time for new production run Stop time for last production run Unscheduled machine downtime percentage Mean time between failures Acceptable product completion percentage Total minutes of unscheduled downtime Total minutes of machine time Sum of (Stop time Start time) Total number of production runs measured (Number of products in production run) (Number of rejected products) Number of products in production run

23 Appendix: Measurement Summary 335 Work-in-process turnover WIP to SWIP Annual cost of goods sold Total work-in-process Total inventory in a work cell Standard inventory for that work cell Scrap percentage Actual cost of goods sold Standard cost of goods sold Standard cost of goods sold First-time-through yield Warranty claims percentage Maintenance expense to fixed assets ratio Indirect expense ratio Reorder point On-time delivery ratio Units produced Defective units Units produced Total number of warranty claims received Total number of products sold Maintenance and repair expense Total gross fixed assets Indirect production cost in period 2 / Units produced in period 2 Indirect production cost in period one / Units produced in period 1 (Average usage per time period Lead time) + Safety stock Number of orders shipped by due date Total number of orders shipped Measurements for the Sales and Marketing Department Market share Dollar volume of company shipments Dollar volume of industry shipments Customer turnover Total number of customers Invoiced customers Total number of customers

24 336 Business Ratios and s Advertising value equivalency Net promoter score Browse to buy conversion rate Direct mail effectiveness ratios Inbound telemarketing retention rate Proportion of completed sales to homepage views Quote to close ratio Pull-through rate Sales per salesperson Total space or time taken by media coverage Advertising rate Number of customers giving score of 9 or 10 on 10-point scale Number of customers giving score of 1 through 6 on 10-point scale Number of buying customers Number of browsing customers Number of leads generated Number of direct mail pieces issued Gross profit on direct mail sales Total direct mail expense Number of customer order cancellations reversed Number of initial customer order cancellations requested Number of sales transactions through company website (Total page view of company home page) (Total hits by search-bots) Dollar value of orders received Dollar value of quoted orders Number of customers placing an order Number of customers with whom contact was initially made Nonrecurring sales Number of FTE sales personnel Sales productivity (Gross nonrecurring revenue) (Variable cost of sales) Sales expense

25 Appendix: Measurement Summary 337 Sales effectiveness Gross revenue Variable cost of goods sold Constraint time used Sales trend percentage Total sales in current period Total sales in previous period Total sales in previous period Product demand elasticity Days of backlog Percentage change in quantity Percentage change in price Dollar volume of sales backlog Average annual Sales / 365