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Revenue Per Employee Ratio Formula | How to Calculate Revenue Per Employee? - YouTube
Channel: WallStreetMojo
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hello everyone hi welcome to the channel
of Wallstreetmojo. Watch the video
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till the end also if you are new to this
channel then you can subscribe us by
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clicking the bell icon. Friends today we're
going to learn a concept which is known
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as revenue per employee ratio formula.
Now as you can see in the picture over
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here with the details of the formula
it's quite visible that the revenue per
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employee formula is your revenue which
is your sales right divided by the
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current number of the employees which
are there in your company. Let's
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understand the formula in detail. Let's
get into the nitty-gritty of the same. See
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revenue per employee is important a very
important financial ratio it is
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calculated by dividing the revenue of
the company that is generated for a
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specific period by the number of
employees
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in a company. So it helps as a measure
of the average
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financial productivity
right so this is the condition. Now so
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basically the average of financial
productivity of each employee of the
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company I mean to say. Now the formula
is again the same the revenue per
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employee is equal to your revenue
divided by the current number of
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employees
right so this is going to be the formula
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let's understand this with the help of
an example to get a more clear picture
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about the same. Now here would consider four firms from the same industry for
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calculating this ratio and we'll
see that how they compare against each
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other. Let's say there are companies and
start writing the headings the name of
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the company they have revenues over here
and this is going to be in dollars
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okay and they have their number of
employees
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and sales per employer ratio. Now let's
begin start inputting the data let's say
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the first company name is company ABC
which has a revenue of let's say $25,000,
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number of employee
as $80,000 is eighty thousand in terms
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of numbers the next company is XYZ
let's say it has $46,000 in terms
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of revenue, 90,000 employees in the
company and we have the next as EFG
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company which has revenue of 23,000
having $105,000
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employees in their company and there's
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last that's called UVW company which has 39,000
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in terms of revenue and
75,000 as number of
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employees just need to do as simple
as that we just need to make a
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calculation of this so its revenue
divided by these sales the the number of
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employees revenue to everybody number of employees if we pull down to control D
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you can see the numbers 0.325, 0.511,
0.21 and
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0.52. So compared on the basis of the
sales for employee ratio company UVW
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0.52 okay. UVW comes out on the top it is
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top much company because
they have generated the highest number
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of revenue with less number of employees
so this is a rank I'm just giving rank
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of the company the rank number one -
this is 3 and this is 4 so UVW comes out
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on the top ok then it is followed by
company XYZ then company ABC and then
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EFG this broadly indicates which company was best able to utilize his employees
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in terms of productive assets during a
specific financial year
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and our answer is quite visible
it's UVW because with less number of
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employees they are able to generate
higher revenues. Now I'm going to show
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you the revenue per employee formula in
the tech industry we just saw that you
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know the formula calculation but if you
see for the real-life companies like
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Facebook, Points International, Alphabet
VeriSign,
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Autoweb and so on and so forth Twitter,
shutter stock and so on and so
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forth. We know that over here Facebook
has the highest sales for employed the
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highest sales per employee it's 1928831
six basically
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points all of this list of all makes
more than half a million of say sales
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per year almost half a million of sales
now interesting to note that Twitter is
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on the list with 681,914
dollars per employee. Now how come
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this is actually quite interesting the
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next set of industry that we are going
to look is for the auto parts the auto
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manufacturing companies now this is the
list of the manufacturing companies and
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we have the data for the for this for
this companies as you can see we have
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Ferrari, Ford Motors, General Motors,
Tesla, Toyota, Honda, Fiat, Bluebird, Tata
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Motors and kandi technologies group we
know that over here Ferrari has the
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highest sales per employee with
approximately revenue of 1.1 million
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dollars per employee and fiat on the
other hand makes around $538,122
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532 538 122 per employee.
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So in general the top tech company is a
revenue per employee is more than the
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manufacturing company is revenue per
employee and this is our conclusion
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right now for the timing in force. Now
the next set of industry that we are
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going to look is the banking industry
this is a list of the top banks and
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their revenue per employee we have UBS,
Westpac, Bank of Montreal, ING Groep,
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Bank of Canada, JPMorgan Chase, N.T Butterfield, Credit Suisse, Westpac and so on
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and so forth. Now over all banks
also makes far lesser sales per employee
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as compared to the tech industry so
tech is still holding it topmost
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position it's not leaving and JP Morgan
makes
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an annual revenue of $403,485
per employee. Now we have
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seen the examples of so many companies right.
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Now as you can see a graph over here
Facebook, Google, Amazon, right this is the
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ratio basically the ratio of this this
ratio basically helps to determine how
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productively a company is able to
utilize its employees and contribute
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to its business growth. So if a company
has let's say higher revenue
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per employee formula it means
that the company is generally doing well
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and trying to make optimum utilization
of the available manpower in the form of
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its employees. However the labor
intensive companies typically tend to
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have lower ratios as compared to those
which require a lesser amount of
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Labor's you can say. So this is why
generally the ratio is employed to
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compare the performance of the company within the industry now when we compare
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to this employee do this per
employer Facebook, Google, Amazon, we know
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that Facebook over here has the highest
level of the annual I mean employ at
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1.929 million per employee
and Google has and everything is in terms of
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million. Google has this employee of
1.475 million and
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Amazon's revenue is at 392034
per employee. So that's
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it for this particular topic if you have
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