Essay Sample on Revenue Per Employee Ratio: Key Measure of Firm's Performance

Revenue per employee is calculated as the revenue of a company taken per the current number of employees (WallStreetMojo, 2019). Revenue per employee ratio is therefore defined as the ratio of revenue per employee and predicts a company's performance in a given quarter. As a financial ratio, the revenue per employee measures the average financial productivity for individual employees in a firm (WallStreetMojo, 2019). Further, the measure is an indication of how well a company utilized the employees using productive assets in a given financial year. The following assignment involves the collection of data from the CNNMoney website for ten companies provided. The data will be used to calculate revenue per employee. The formulas are used in the attached excel sheet attached.

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A higher ratio means that a company is performing well and utilizes its employees to contribute to business growth. A higher rate implies greater productivity and indicates that companies are profitable (Investopedia, 2003). This ratio is more useful when comparing companies in the same industry or when identifying historical changes in an individual company (Investopedia, 2003). The revenue per employee ratio is affected by factors such as the company's industry, employee turnover, and age of the company (Investopedia, 2003).

The data collected for the ten companies provided has been fed from the last quarter of each company's results. Therefore, the ending dates of the previous quarter of 2019 is not the same across all the provided companies. As seen in the excel sheet attached, we find that two companies, Aflac and Amazon, have the highest revenue per employee ratio. Aflac leads with 2364050, while Amazon follows at 2263154. These are the only two companies in the list provided that have hit revenue per employee ratio that is greater than a million. The remaining eight companies have an employee ratio of less than a million. Of the remaining eight companies with a revenue per employee ratio of less than a million, only three companies have a revenue per employee ratio greater than half a million. They are Adobe at 851586, AES Corp at 572541, and AIG at 776785. The remaining companies 3M, Abbot Laboratories, Accenture, American Airlines, and Capital One, has revenue per employee ratio at 356013, 407208, 157146, 201668, and 487543, respectively.

Based on the knowledge about revenue per employee ratio, we can conclude that Aflac and Amazon are the leading companies in terms of productivity. The two companies are well utilizing their available resources, that is, human capital, for business growth. Further, the two companies can be argued to be the most profitable among the provided list of companies with Aflac, the best company in terms of employee and asset utilization and profitability.

We find a large significant difference between the highest ratio and the smallest ratio in the data. The least value of the revenue per employee ratio is 157146 for Accenture. These figures could be a good comparison to look at the different companies and identify which industry could be utilizing their assets well for business growth. Although the revenue per employee value has been said to v be affected by factors such as the age of the company, I think that this comparison would set a benchmark for which companies such as Accenture could identify the leading causes for low productivity and address the issue for maximum profits and competition in the markets. As such, the revenue per employee ratio as a financial ratio, in this case, can be used to benchmark the performance of a company not only from its historical data but from a comparison of other companies.

References

Investopedia. (2003, November 26). Explaining the Ratio of Revenue per Employee. Retrieved from https://www.investopedia.com/terms/r/revenueperemployee.asp

WallStreetMojo. (2019, September 7). Revenue Per Employee Ratio | Industry, Top Companies, and Ranking. Retrieved from https://www.wallstreetmojo.com/revenue-per-employee/