If you use a baseline period expressed in terms of 1.00, the percentage increase or decrease in sales, gross margin, net income, or any other income statement line item will be evident from the comparative analysis.
Other ratios that may be useful could be based on other types of data. For example, in a labor-intensive environment where the output of each individual employee is a key factor in sales and profitability, useful ratios could include:
Sales by Employee = Total Sales / Number of Employees
Added Value by Employee = Total Added Value (Gross or Net Profit) / Number of Employees
In a capital-intensive environment, ratios related to the investment in equipment, or maintenance costs may be more relevant:
Expense Analysis Ratios
One type of ratios that can be used to track expenses is by comparing different categories of expenses to sales:
Fixed Expenses or Overhead / Sales
Variable Expenses / Sales
Personnel-related Expenses / Sales
This type of ratios will be useful to the extent there are parameters established, comparison is made using benchmark data, or the evolution of expenses is compared from one period to another.
Another way to analyze expenses is by comparison to an associated criteria, such as number of employees, customers, or products. These ratios give a type of unit cost which, when compared to a parameter, or when followed over time, can provide indications of where variances are occurring:
Customer Service Expenses / Number of Customers
Advertising Expenses / Number of Products
Production Expenses / Number of Units Produced
Personnel-related Expenses / Average Number of Employees
Productivity Ratios
Productivity rations are intended to show the results obtained with the expenses incurred or the resources employed. Some overall ratios include:
Net Income / Expenses
Sales / Expenses
Production / Expenses
Trade Accounts Receivable / Expenses
More specific ratios can be calculated using virtually any type of criteria. Ratios that are meaningful will depend on the nature of the business; that is, what factors affect productivity and can be tracked and controlled.
Another productivity ratio, that is probably more oriented toward a manufacturing or production environment, is:
Utilization of Productive Capacity = Production Obtained / Production Capacity