The financial metric revenue per employee is an efficiency ratio that analyzes management's ability to use its employees to generate revenue. Only two variables are required to determine this value: total revenues, which can be found on the income statement and the number of employees, which can often be found in the company's annual report.
Revenue per Employee = Revenues / Number of Employees
Revenue per employee looks at the ratio of sales to the number of employees required at that level of sales. When making a comparison between two companies, the company with the higher value for revenues per employee would be considered more efficient or productive. A superior measure would be income per employee since it uses operating income in the numerator, which takes into consideration expenses, and is not affected by non-operating or one-time adjustments to net income.
When drawing conclusions about the relative performance of a company, benchmark comparisons should be made with competitors in the same industry.
Company A's income statement indicates total revenues of $29,611,000. The company's online profile indicates a total of 84 employees. The revenues per employee ratio would be:
= $29,611,000 / 84, or $352,512 per employee
income statement, revenues, income per employee, operating expense ratio
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