1. Operating Performance Ratios: Introduction
  2. Operating Performance Ratios: Fixed-Asset Turnover
  3. Operating Performance Ratios: Sales/Revenue Per Employee
  4. Operating Performance Ratios: Operating Cycle

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.


Operating Performance Ratios: Fixed-Asset Turnover
Related Articles
  1. Investing

    Explaining the Fixed-Asset Turnover Ratio

    The fixed-asset turnover ratio measures a company’s ability to generate revenue from its fixed assets.
  2. Investing

    How to Evaluate a Company's Balance Sheet

    Asset performance shows how what a company owes and owns affects its investment quality.
  3. Investing

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.
  4. Investing

    How to Calculate a Turnover Ratio

    A turnover ratio measures a mutual fund’s level of trading activity in a given time period, usually a year.
  5. Investing

    Understanding Activity Ratios

    Activity ratios measure how effectively a business uses its assets.
  6. Investing

    Analyze Investments Quickly With Ratios

    Make informed decisions about your investments with these easy equations.
  7. Investing

    Analyzing Google's Balance Sheet

    We take a look at Google's balance sheet to learn about the health of the company and how well it is run.
  8. Investing

    Dynamic Current Ratio: What It Is And How To Use It

    Learn why this ratio may be a good alternative to the current, cash and quick ratios.
  9. Investing

    Debt Ratios

    Learn about the debt ratio, debt-equity ratio, capitalization ratio, interest coverage ratio and the cash flow to debt ratio.
Frequently Asked Questions
  1. What is considered a healthy operating profit margin?

    Operating profit margin is one of the key profitability ratios that investors and analysts consider when evaluating a company. ...
  2. What is the difference between preference and ordinary shares?

    Preference shares, or preferred shares, have the advantage of a higher priority claim to the assets of a corporation in case ...
  3. What's the difference between "top-down" and "bottom-up" investing?

    Top-down investing looks at the economy and tries to forecast which industry will generate the best returns. A bottom-up ...
  4. Why is business ethics important?

    No matter the size, industry or level of profitability of an organization, business ethics are one of the most important ...
Trading Center