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

    Explaining Property, Plant and Equipment

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

    Understanding Activity Ratios

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

    Analyze Investments Quickly With Ratios

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

    Debt Ratios

    Learn about the debt ratio, debt-equity ratio, capitalization ratio, interest coverage ratio and the cash flow to debt ratio.
  6. Investing

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
  7. Investing

    Efficiency Ratio

    There are many types of efficiency ratios, but all measure how well a company utilizes its resources to make a profit. Business managers use these ratios to determine how well they are operating ...
Frequently Asked Questions
  1. Where else can I save for retirement after I max out my Roth IRA?

    The first option to explore is to determine if you can contribute to a 401(k), 403(b), or 457 plan at work. If your employer ...
  2. How did George Soros "break the Bank of England"?

    In Britain, Black Wednesday (September 16, 1992) is known as the day that speculators broke the pound. They didn't actually ...
  3. What counts as "debts" and "income" when calculating my debt-to-income (DTI) ratio?

    It's important to know your debt-to-income ratio because it's the figure lenders use to measure your ability to repay the ...
  4. Who are Monsanto's main competitors?

    Learn about Monsanto Company's two main operating divisions and its main competitors within each sector, including The Mosaic ...
Trading Center