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    Revenue Per Employee

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    Thuong Nguyen
    Revenue per employee ratio measures a company's revenue generated per employee and is calculated by dividing a company's total revenue by its total number of employees, providing insight into a company's operational efficiency and productivity. The ratio should be compared both historically for a company and against industry peers to understand relative performance over time and competitiveness. Analysts use revenue per employee to evaluate how effectively a company utilizes its human resources to generate sales.

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    Revenue Per Employee

    Uploaded by

    Thuong Nguyen
    45 views8 pages
    Revenue per employee ratio measures a company's revenue generated per employee and is calculated by dividing a company's total revenue by its total number of employees, providing insight into a company's operational efficiency and productivity. The ratio should be compared both historically for a company and against industry peers to understand relative performance over time and competitiveness. Analysts use revenue per employee to evaluate how effectively a company utilizes its human resources to generate sales.

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    Revenue per employee ratio measures a company's revenue generated per employee and is calculated by dividing a company's total revenue by its total number of employees, providing insight into a company's operational efficiency and productivity. The ratio should be compared both historically for a company and against industry peers to understand relative performance over time and competitiveness. Analysts use revenue per employee to evaluate how effectively a company utilizes its human resources to generate sales.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    45 views8 pages

    Revenue Per Employee

    Uploaded by

    Thuong Nguyen
    Revenue per employee ratio measures a company's revenue generated per employee and is calculated by dividing a company's total revenue by its total number of employees, providing insight into a company's operational efficiency and productivity. The ratio should be compared both historically for a company and against industry peers to understand relative performance over time and competitiveness. Analysts use revenue per employee to evaluate how effectively a company utilizes its human resources to generate sales.

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    of 8

    REVENUE PER

    EMPLOYEE RATIO

    @Ravi Nishant
    What is Revenue Per Employee ?

    Revenue per employee calculates the number


    of sales generated by one employee or sales
    done by each employee.

    •An Analyst always looks to analyze company financially as well as


    operationally.
    •It must be remembered that the operational ratios impact the financial
    ratio as well.
    •As legend investor warrant buffet says, operational efficiency leads to
    more profit hence it becomes imperative to analyze the company
    operationally also.
    Revenue Per Employee Ratio Formula

    •It is an easy indicator of productivity & efficiency of an organization’s


    personnel. It also indicates how effectively an organization is utilizing
    its human resources.
    •Generally, the number of employees keeps changing over period of
    time. Therefore, it is good practice to use an average number of
    employees during a particular period.
    Examples & Explanation of Revenue
    Per Employee Ratio Formula
    Labour Intensive Industry

    Net Sales Number of Revenue Per


    Company Name
    (million $) Employees Employee ($)

    Company A 25,000 80000 3,12,500

    Company B 46,000 90000 5,11,111

    Company C 23,000 50000 4,60,000

    Company D 39,000 75000 5,20,000

    Company E 90,000 180000 5,00,000


    Examples & Explanation of Revenue
    Per Employee Ratio Formula

    Less Labour-Intensive Industry

    Number of Revenue Per


    Company Name Net Sales (million $)
    Employees Employee ($)

    Company PQR Ltd 20000 18000 11,11,111

    Company MNO
    5000 1108 45,12,635
    Ltd

    Company TPU Ltd 6000 3000 20,00,000

    Company KNO Ltd 18000 15000 12,00,000

    Company APP Ltd 2000 1500 13,33,333


    Explanation

    •The less labor-intensive company generates more revenue per


    employee.

    •This is because of industry-specific advantages and variations in the


    operation.

    •Analyst generally compares revenue per employee with the median of


    companies into the same industry.

    • In less labor-intensive industry, Company MNO operates at the highest


    revenue per employee because its operations are more efficient than its
    peers.

    • It can be said that each employee in the MNO company is more efficient
    than the peer set.

    •Same is the true for labor-intensive industries.


    Significance and Use of Revenue per
    employee Ratio Formula

    -Revenue per employee is an absolute figure in terms of given currency;


    therefore, it may look less useful in an analytical sense.

    -For interpretation purposes revenue per employee, the figure should


    be compared with the historical data of the company or industry to see
    any deterioration or improvement.

    -It must also be compared with the other peer companies operating in
    the same industry.

    -Sometimes earnings per employee can be calculated by using net


    profit, instead of sales revenue, in the above-stated formula. This also
    gives insights into the productivity of employees.
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