Back to the Profitability Report

Net Profit Margin Net Pretax Profit ÷ Revenue
The bottom line -- the amount you have left after every other expense is taken out. (Sageworks adjusts the number so any extra funds the owners have taken out have been added back in.)
Gross Profit Margin Gross Profit ÷ Revenue
Gross profit is your revenue minus what it costs to make your product.
EBITDA Margin EBITDA ÷ Revenue
Many companies use this as a shorthand measure of cash flow. EBITDA is earnings before interest, taxes, depreciation, and amortization.
Return on Equity Net Income ÷ Total Equity
The return your shareholders are getting on their investment.
Return on Assets Net Income ÷ Total Assets
Net income generated for each dollar of assets. It's especially relevant for capital-intensive industries, like manufacturing.
* Interest Coverage Ratio EBITDA ÷ Interest Expense
This ratio shows roughly how easily you can repay your debts.
* Debt to Equity Ratio Total Liabilities ÷ Total Equity
What you owe compared with what you own.
Sales per Employee $277,970
Profit per Employee $9,041
Payroll as % of Sales 13%
Advertising as % of Sales 1.5%
Inventory Days (Inventory ÷ Cost of Goods Sold) x 365
The amount of time it takes to convert inventory into sales.
Accounts Payable Days (Accounts Payable ÷ Cost of Goods Sold) x 365
The number of days, on average, you take to pay your bills.
Accounts Receivable Days (Accounts Receivable ÷ Sales) x 365
The number of days, on average, your customers take to pay you.
** Current Ratio Total Current Assets÷Total Current Liabilities
The amount of cash (or assets that can be turned into cash) on hand.
** Quick Ratio (Cash + Accounts Receivable) รท Total Current Liabilities
Similar to the current ratio, this is a good measure of a company's short-term cash position.
Sample Size 3,052

* Because retail is such a risky business, equity investors generally stay away. As a result, retailers often have a lot of debt, which they must manage very carefully. The interest coverage ratio should be 6 or higher, with 8 being a healthier target, says Geoff Holczer, a Tatum CFO who has served as a financial executive at several large retailers. You may be in trouble if your company's debt to equity ratio rises above 4. Ideally, for growing companies, it should be lower than 1.5. "The best answer is, it should be 0," says Holczer.

** Industry Focus: Retail
For retailers, the current ratio -- which measures all assets, including inventory -- often looks much better than the quick ratio, says Holczer. In general, for retailers, both should be higher than 1, except in certain seasons; as inventory builds before the holiday season, for example, payables will increase faster than sales, and the quick ratio will drop.

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