Definition
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.
Calculation
Revenue per Employee = Revenues / Number of Employees
Explanation
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.
Example
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
Related Terms
income statement, revenues, income per employee, operating expense ratio
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