By Richard Loth (Contact | Biography)

The next series of ratios we'll look at in this tutorial are the operating performance ratios.

Each of these ratios have differing inputs and measure different segments of a company's overall operational performance, but the ratios do give users insight into the company's performance and management during the period being measured.

These ratios look at how well a company turns its assets into revenue as well as how efficiently a company converts its sales into cash. Basically, these ratios look at how efficiently and effectively a company is using its resources to generate sales and increase shareholder value. In general, the better these ratios are, the better it is for shareholders.

In this section, we'll look at the fixed-asset turnover ratio and the sales/revenue per employee ratio, which look at how well the company uses its fixed assets and employees to generate sales. We will also look at the operating cycle measure, which details the company's ability to convert is inventory into cash.

To find the data used in the examples in this section, please see the Securities and Exchange Commission's website to view the 2005 Annual Statement of Zimmer Holdings.


Next: Operating Performance Ratios: Fixed-Asset Turnover »



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