Operating Performance Ratios

Operating performance ratios are tools which measure the function of certain core operations for an organization or business. Particularly, these ratios reveal information about how efficiently that organization is using resources to generate sales and cash. A company with strong performance ratios is able to utilize a minimum resource pool to generate high levels of sales, as well as a significant cash inflow. In this tutorial, we’ll examine some of the most commonly used operating performance ratios. By reading this tutorial, you should come away with a general sense of what these measures are, how they are determined, and what information or insight they can provide to those within a company or interested in investing. (Related: Ratio Analysis: Using Financial Ratios)

3 Main Operating Performance Ratios

There are three primary operating performance ratios we will consider. They include the following:

1. Fixed-asset turnover

2. Sales/revenue per employee

3. Operating cycle

Each of these ratios utilizes different inputs to measure varied portions or segments of a business’ overall performance. First, we’ll take a look at fixed-asset turnover.