Ratios and Key Performance Indicators
Gain Invaluable Performance Insight!
Ratios and Key Performance indicators can provide invaluable insight into the performance of your operation, and our financial statements include those significant to a retailer as part of our standard services.
You can become more proficient understanding and using these in your own business by reviewing the definitions here and trying out the calculators with your own financial information.
If you would like further information, please feel free to contact us. We’d be happy to talk you through them further. Simply select the “Other” service and describe your question in our Contact Us tab within this website. A member of our team will contact you.
Current Assets to Current Liabilities
This ratio assesses the ability of a business to meet its current (short term) liabilities. The ratio is computed by dividing current assets by current liablities. A value greater than 1 indicates there are more current assets than liabilities.
Total Assets to Total Liabilities
Expands on the idea of the Current Ratio to consider total assets and liabilities rather than just current assets and liabilities.
This calculation also differs from the Current Ratio in that it is the proportion of liabilities to assets rather than the reverse. Therefore, in this case, a number less than 1 indicates there are more assets than liabilities.
This ratio is calculated by dividing total liabilities by total assets.
This ratio measures the proportion of debt that makes up total capital invested which includes both debt and owners' equity. It indicates the extent of debt used to finance the business.
The percentage is calculated by dividing total long term debt by the sum of long term debt plus owners' equity.
Values less than 50% indicate there is more owners' equity than debt.
This ratio shows what the relationship of owners' equity is to long term debt and owners' equity.
The percentage is calculated by dividing equity by the sum of long term debt plus owners' equity. Values greater than 50% indicate there is more owners' equity than debt.
Average Sales Per Transaction
This measure gives an indication of average customer basket size.
It is calculated as average weekly sales divided by average weekly transactions. In general, efforts to increase basket size can produce increased profitability as expenses are leveraged to a greater extent.
Average Sales Per Square Foot of Selling Area
This is a measure of the productivity of the selling floor.
It is calculated as weekly average sales divided by the square footage of the selling floor. Efforts to increase sales per square foot will generally increase profitabilty through greater leveraging of building expenses and investments.
Average Sales Per Square Foot of Building Area
This is a measure of the productivity of the building.
It is calculated as weekly average sales divided by the square footage of the building. Efforts to increase sales per square foot will generally increase profitabilty through greater leveraging of building expenses and investments.
Inventory turns measures the speed at which inventory is sold or used up. It is an indicator of how effectively inventory is managed. The number of turns is the number of times inventory is cycled throughout the year.
It can be calculated for any time period one wishes to analyze (ie. 13 week quarter or 52 week year).
Performing the calcuation at the department level (eg. Produce, Meat, Bakery, Deli or Grocery) provides the most actionable information.
The calculation is annualized sales for the period divided by average inventory during the period.
A related measure is Days Supply.
Indicates how many days on average a company turns its inventory into sales. This will typically vary by department. It can also be thought of as how many days of inventory one has on hand.
It is calculated by dividing the number of days in the year by inventory turns. Performing the calculation at the department level (eg. Meat, Produce, Bakery, Deli or Grocery ) provides the most actionable information. The fewer days of supply on hand, the faster one is generating cash and minimizing shrink, especially in perishable departments.
Rate Per Hours Worked
This is a measure of the average rate of pay per hour being paid to employees.
It is calculated as total payroll divided by total hours worked.
Rate per hours worked can be impacted in a number of ways such as by how much overtime is being used or how much one's most highly paid employees are scheduled.
Sales Per Hour Worked
This calculation provides the average sales per employee. It provides an indication of how effectively staff is being scheduled.
It is calculated as total sales divided by total productive hours for the period.
Sales per Hour Worked can be impacted in a number of ways such as by minimizing hours worked at non-peak times and by efforts to increase sales per transaction.
Return on Assets
This ratio measures how effectively total assets are being used to generate a profit.
The ratio is calculated by dividing net profit (annualized) by total assets. Evaluating results can be achieved by comparing to other investments options.
Return on Net Worth
This ratio measures the rate of return that ownership is earning on the investment.
This measure is calculated by dividing net profit by total equity. Evaluating results can be achieved by comparing to other investments options.
Debt Service Coverage Ratio
This is a measure to indicate how well financial commitments are able to be financed through the operations of the business.
It is calculated by dividing the total of debt and rent obligations into EBITDA (Earnings Before Interest, Taxes,Depreciation, and Amortization), a proxy for cash flow. The larger the number, the more cash is available for expenditures other than debt and rent. Values less than one indicate there is insufficient funds being generated to cover debt and rent payments.