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Sales per employee definition

Description

Sales per employee measure the amount of sales, generated per one employee. It is a popular and commonly used ratio. Data to calculate this ratio is collected from management accounting and income statement.

This ratio mostly interests company’s owners, as it shows its’ labor productivity, but it is important for the investors, too. While calculating sales per employee ratio, we use the number of employees at the end of the period, but in order to get a more precise value of the ratio, using an average number of employees is better.

Norms and limitations

In general, the higher value of the ratio is, the better.

It is not recommended to compare this ratio with those of the companies, working in different industries, because the intensity of labor might vary a lot.

Formula

Net sales (revenues, sales) can be briefly described as sales, deducting returns and discount for customers.

Number of employees: to put it briefly, it shows the amount of people, working for the company (can be counted as “at the end of the period” or “average of the period”).