KPI
NetProfit
Description
Netprofit,alsoreferredtoasthebottomline,netincome,ornetearningsisa
measureoftheprofitabilityofaventureafteraccountingforallcosts.Tocalculate
netprofitforaventure(suchasacompany,division,orproject),subtractallcosts,
includingafairshareoftotalcorporateoverheads,fromthegrossrevenuesor
turnover.
Netprofit($)=Salesrevenue($)Totalcosts($)
Profitmargin,netmargin,netprofitmarginornetprofitratioallrefertoa
measureofprofitability.Itiscalculatedbyfindingthenetprofitasapercentageof
therevenue.
NetProfitMargin
OperatingProfitMargin
Inbusiness,operatingmarginalsoknownasoperatingincomemargin,
operatingprofitmarginandreturnonsales(ROS)istheratioofoperating
income("operatingprofit"intheUK)dividedbynetsales,usuallypresentedin
percent.
EBITDA
Netprofitmeasurestheprofitabilityofventuresafteraccountingforallcosts.
Earningsbeforeinterest,taxes,depreciation,andamortization(EBITDA)isan
accountingmeasurecalculatedusingacompany'snetearnings,beforeinterest
expenses,taxes,depreciationandamortizationaresubtracted,asaproxyfora
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RevenueGrowthRate
TotalShareholderReturn(TSR)
EconomicValueAdded(EVA)
company'scurrentoperatingprofitability,i.e.,howmuchprofititmakeswithits
presentassetsanditsoperationsontheproductsitproducesandsells,aswellas
providingaproxyforcashflow.
RevenueGrowthisthepercentincrease(ordecrease)inacompany'srevenue
betweentwoormoreequivalentfiscalperiods.RevenueGrowthisusedto
measurehowfastacompany'sbusinessisexpanding.
TotalShareholderReturn(TSR)(orsimplyTotalReturn)isameasureofthe
performanceofdifferentcompaniesstocksandsharesovertime.Itcombines
sharepriceappreciationanddividendspaidtoshowthetotalreturntothe
shareholderexpressedasanannualizedpercentage.
Incorporatefinance,EconomicValueAdded(EVA),isanestimateofafirm's
economicprofitbeingthevaluecreatedinexcessoftherequiredreturnofthe
company'sinvestors(beingshareholdersanddebtholders).Quitesimply,EVAis
theprofitearnedbythefirmlessthecostoffinancingthefirm'scapital.
EVAisnetoperatingprofitaftertaxes(orNOPAT)lessacapitalcharge,thelatter
beingtheproductofthecostofcapitalandtheeconomiccapital.Thebasic
formulais:
where:
ReturnonInvestment(ROI)
,istheReturnonInvestedCapital(ROIC);
istheweightedaveragecostofcapital(WACC);
istheeconomiccapitalemployed;
NOPATisthenetoperatingprofitaftertax,withadjustmentsand
translations,generallyfortheamortizationofgoodwill,thecapitalization
ofbrandadvertisingandothernoncashitems.
Returnoninvestment(ROI)isthebenefittotheinvestorresultingfroman
investmentofsomeresource.AhighROImeanstheinvestmentgainscompare
favorablytoinvestmentcost.Asaperformancemeasure,ROIisusedtoevaluate
theefficiencyofaninvestmentortocomparetheefficiencyofanumberof
differentinvestments.
ROI=(gainfrominvestmentcostofinvestment)/costofinvestment
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Returnoncapitalemployedisanaccountingratiousedinfinance,valuation,and
accounting.
ReturnonCapitalEmployed(ROCE)
ReturnonAssets(ROA)
(Expressedasa%)
Thereturnonassets(ROA)showsthepercentageofhowprofitableacompany's
assetsareingeneratingrevenue.
ROAcanbecomputedas:
Returnonequity(ROE)measurestherateofreturnontheownershipinterest
(shareholders'equity)ofthecommonstockowners.
ReturnonEquity(ROE)
DebttoEquity(D/E)Ratio
CashConversionCycle(CCC)
WorkingCapitalRatio
OperatingExpenseRatio(OER)
CAPEXtoSalesRatio
Thedebttoequityratio(D/E)isafinancialratioindicatingtherelativeproportion
ofshareholders'equityanddebtusedtofinanceacompany'sassets.Closely
relatedtoleveraging,theratioisalsoknownasRisk,GearingorLeverage.
Inmanagementaccounting,theCashconversioncycle(CCC)measureshowlonga
firmwillbedeprivedofcashifitincreasesitsinvestmentinresourcesinorderto
expandcustomersales.
Workingcapital(abbreviatedWC)isafinancialmetricwhichrepresentsoperating
liquidityavailabletoabusiness,organizationorotherentity,including
governmentalentity.Alongwithfixedassetssuchasplantandequipment,working
capitalisconsideredapartofoperatingcapital.Thebasiccalculationofthe
workingcapitalisdoneonthebasisofthegrosscurrentassetsofthefirm.
workingcapital=currentassetscurrentliabilities
TheTotalAnnualFundOperatingExpenses("ExpenseRatio")isthelineofthefee
tableintheprospectusthatrepresentsthetotalofallofamutualfund'sannual
fundoperatingexpenses,expressedasapercentageofthefund'saveragenet
assets.Lookingattheexpenseratiocanhelpyoumakecomparisonsamongfunds.
Capitalexpenditure(CAPEX)toSalesRatiomeasuresthelevelofinvestmentsa
companyismakingintoitsfuture.Itcomparesthecapitalexpendituretosalesina
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PriceEarningsRatio(P/ERatio)
Tounderstandyourcustomers:
NetPromoterScore(NPS)
CustomerRetentionRate
CustomerProfitabilityScore
CustomerLifetimeValue
CustomerTurnoverRate
CustomerEngagement
Togaugeyourmarketand
marketingefforts:
MarketGrowthRate
givenperiod:
CAPEXtoSalesRatio=(CAPEXinperiodt/NetSalesinperiodt)x100
Thepricetoearningsratio,orP/Eratio,isanequityvaluationmultiple.Itis
definedasmarketpricepersharedividedbyannualearningspershare
NetPromoterorNetPromoterScore(NPS)isamanagementtoolthatcanbeused
togaugetheloyaltyofafirm'scustomerrelationships.Itservesasanalternativeto
traditionalcustomersatisfactionresearchandclaimstobecorrelatedwithrevenue
growth.
Retentionrateistheratioofthenumberofretainedcustomerstothenumberat
risk.
Retentionrateiscalculatedas:
Customerprofitability(CP)istheprofitthefirmmakesfromservingacustomeror
customergroupoveraspecifiedperiodoftime,specificallythedifferencebetween
therevenuesearnedfromandthecostsassociatedwiththecustomerrelationship
inaspecifiedperiod.
Inmarketing,customerlifetimevalue(CLV)(oroftenCLTV),lifetimecustomer
value(LCV),oruserlifetimevalue(LTV)isapredictionofthenetprofitattributed
totheentirefuturerelationshipwithacustomer.
Customerlifetimevalue($)=Margin($)*(RetentionRate(%)[1+DiscountRate
(%)RetentionRate(%)])
Customerattrition,alsoknownascustomerchurn,customerturnover,or
customerdefection,isthelossofclientsorcustomers.Whencompaniesare
measuringtheircustomerturnover,theytypicallymakethedistinctionbetween
grossattritionandnetattrition.Grossattritionisthelossofexistingcustomersand
theirassociatedrecurringrevenueforcontractedgoodsorservicesduringa
particularperiod.Netattritionisgrossattritionplustheadditionorrecruitmentof
similarcustomersattheoriginallocation.Financialinstitutionsoftentrackand
measureattritionusingaweightedcalculationcalledRecurringMonthlyRevenue
(orRMR).
Customerengagement(CE)istheengagementofcustomerswithoneanother,
withacompanyorabrand.Theinitiativeforengagementcanbeeitherconsumer
orcompanyledandthemediumofengagementcanbeonoroffline.
Theincreaseinsizeorsalesobservedwithinagivenconsumergroupovera
specifiedtimeframe.Whenthemanagementofabusinessisreviewingthesuccess
ofaproduct,itneedstodeducttheoverallmarketgrowthratefromtheobserved
productsalesgrowth.
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MarketShare
BrandEquity
CostperLead
ConversionRate
Searchengineoptimization(SEO)
BounceRate
"Marketshareisthepercentageofamarket(definedintermsofeitherunitsor
revenue)accountedforbyaspecificentity."Unitmarketshare:Theunitssoldbya
particularcompanyasapercentageoftotalmarketsales,measuredinthesame
units."
Unitmarketshare(%)=100*Unitsales(#)/TotalMarketUnitSales(#)
Brandequityaphraseusedinthemarketingindustrywhichdescribesthevalueof
havingawellknownbrandname,basedontheideathattheownerofawell
knownbrandnamecangeneratemoremoneyfromproductswiththatbrand
namethanfromproductswithalesswellknownname,asconsumersbelievethat
aproductwithawellknownnameisbetterthanproductswithlesswellknown
names.
Costperlead,oftenabbreviatedasCPL,isanonlineadvertisingpricingmodel,
wheretheadvertiserpaysforanexplicitsignupfromaconsumerinterestedinthe
advertiser'soffer.Itisalsocommonlycalledonlineleadgeneration.
The conversion rate is the proportion of visits to a website who take action to
go beyond a casual content view or website visit, as a result of subtle or
direct requests from marketers, advertisers, and content creators.
Searchengineoptimization(SEO)istheprocessofaffectingthevisibilityofa
websiteorawebpageinasearchengine's"natural"orunpaid("organic")search
results.Ingeneral,theearlier(orhigherrankedonthesearchresultspage),and
morefrequentlyasiteappearsinthesearchresultslist,themorevisitorsitwill
receivefromthesearchengine'susers.
Bouncerate(sometimesconfusedwithexitrate)isanInternetmarketingterm
usedinwebtrafficanalysis.Itrepresentsthepercentageofvisitorswhoenterthe
siteand"bounce"(leavethesite)ratherthancontinueviewingotherpageswithin
thesamesite.
Bouncerateisameasureoftheeffectivenessofawebsiteinencouragingvisitors
tocontinuewiththeirvisit.Itisexpressedasapercentageandrepresentsthe
proportionofvisitsthatendonthefirstpageofthewebsitethatthevisitorsees.
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where
CustomerEngagementLevel
OnlineShareofVoice(OSOV)
KloutScore
Tomeasureyouroperational
performance:
SixSigmaLevel
CapacityUtilizationRate(CUR)
OrderFulfilmentCycleTime
DeliveryInFull,OnTime(DIFOT)
Rate
Rb=Bouncerate
Tv=Totalnumberofvisitorsviewingonepageonly
Te=Totalentriestopage
Customerengagement(CE)istheengagementofcustomerswithoneanother,
withacompanyorabrand.Theinitiativeforengagementcanbeeitherconsumer
orcompanyledandthemediumofengagementcanbeonoroffline.
ShareofVoiceinOnlineAdvertisingisanadrevenuemodelthatfocusesonweight
orpercentageamongotheradvertisers.Forexample,iftherearefouradvertisers
onawebsite,eachadvertisergets25percentoftheadvertisingweight.This
methodensuresoneadwillnotbeseenanymorethantheotherthreeads.And,
sincetherearetypicallyalimitednumberofadvertisersusingaShareofVoice
model,adexposureisoptimized.
Kloutisawebsiteandmobileappthatusessocialmediaanalyticstorankitsusers
accordingtoonlinesocialinfluenceviathe"KloutScore",whichisanumerical
valuebetween1and100.Indeterminingtheuserscore,Kloutmeasuresthesizeof
auser'ssocialmedianetworkandcorrelatesthecontentcreatedtomeasurehow
otherusersinteractwiththatcontent.
SixSigmaisasetoftechniquesandtoolsforprocessimprovement.SixSigmaseeks
toimprovethequalityofprocessoutputsbyidentifyingandremovingthecauses
ofdefects(errors)andminimizingvariabilityinmanufacturingandbusiness
processes.Itusesasetofqualitymanagementmethods,includingstatistical
methods,andcreatesaspecialinfrastructureofpeoplewithintheorganization
("Champions","BlackBelts","GreenBelts","YellowBelts",etc.)whoareexpertsin
thesemethods.
Capacityutilizationistheextenttowhichanenterpriseoranationactuallyusesits
installedproductivecapacity.Itistherelationshipbetweenactualoutputthat'is'
actuallyproducedwiththeinstalledequipment,andthepotentialoutputwhich
'could'beproducedwithit,ifcapacitywasfullyused.
OrderFulfillmentCycleTimeisacontinuousmeasurementdefinedastheamount
oftimefromcustomerauthorizationofasalesordertothecustomerreceiptof
product.
DIFOT(DeliveredInFull,OnTime)orOTIF(OnTimeInFull)isameasurementof
deliveryperformanceinasupplychain.Someconsideritsuperiortootherdelivery
performanceindicators,suchasshippedontime(SOT)andontimeperformance
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InventoryShrinkageRate(ISR)
ProjectScheduleVariance(PSV)
ProjectCostVariance(PCV)
EarnedValueManagement(EVM)
InnovationPipelineStrength(IPS)
ReturnonInnovationInvestment
(ROI2)
TimetoMarket
FirstPassYield(FPY)
(OTP),becauseitlooksatdeliveriesfromthepointofviewofthecustomer.It
measureshowoftenthecustomergetswhattheywantatthetimetheywantit.
OTIF(OnTimeInFull),orDIFOT(DeliveredInFullOnTime),isoneofthe
fundamentalmeasurementsforlogisticsperformance.GenerallyOTIFiscalculated
bytakingintoaccountthenumberofdeliveries:
OTIF(%)=numberofdeliveriesOTIFtotalnumberofdeliveries*100
Inventoryshrinkageistheexcessamountofinventorylistedintheaccounting
records,butwhichnolongerexistsintheactualinventory.Itsdisappearancemay
beduetotheft,damage,miscounting,incorrectunitsofmeasure,evaporation,or
similarissues.
ScheduleVarianceindicateshowmuchaheadorbehindscheduletheprojectis.
ScheduleVariancecanbecalculatedasusingthefollowingformula:
ScheduleVariance(SV)=EarnedValue(EV)PlannedValue(PV)
CVshowsifyourprojectisunderoroverbudget.CViscalculatedusingthis
formula:
CostVariance(CV)=EarnedValueActualCost
Earnedvaluemanagement(EVM),orEarnedvalueproject/performance
management(EVPM)isaprojectmanagementtechniqueformeasuringproject
performanceandprogressinanobjectivemanner.
Theinnovationpipelinestrengthcanbemeasuredbycalculatingthefuture
revenuepotentialofeachmajorinnovationprojectandfindingthetotalfuture
revenuepotentialfromthetotalnumberofprojects.Theprofitpotentialofa
particularinnovationprojectmayneedtobeadjustedforthelikelihoodthatthe
expectedprofitswillberealized,especiallyifitisalongwayfromcompletion.
Aperformancemeasureusedtoevaluatetheeffectivenessofacompany's
investmentinnewproductsorservices.Thereturnoninnovationinvestmentis
calculatedbycomparingtheprofitsofnewproductorservicesalestothe
research,developmentandotherdirectexpendituresgeneratedincreatingthese
newproductsorservices.Alsoreferredtoas"R2I"or"ROI2."
Incommerce,timetomarket(TTM)isthelengthoftimeittakesfromaproduct
beingconceiveduntilitsbeingavailableforsale.TTMisimportantinindustries
whereproductsareoutmodedquickly.
Firstpassyield(FPY),alsoknownasthroughputyield(TPY),isdefinedasthe
numberofunitscomingoutofaprocessdividedbythenumberofunitsgoinginto
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Tounderstandyouremployees
andtheirperformance:
thatprocessoveraspecifiedperiodoftime.
ReworkLevelmeasurestheamountofreworkthathastotakeplaceinaprocess
ReworkLevel
andisthereforeanindicatorofinternaloperationalefficiency.Itsimplymeasures
thenumberorpercentageofitemsthatrequirerework.
COPQconsistsofthosecostswhicharegeneratedasaresultofproducing
defectivematerial.Thiscostincludesthecostinvolvedinfulfillingthegapbetween
thedesiredandactualproduct/servicequality.Italsoincludesthecostoflost
CostofPoorQuality
opportunityduetothelossofresourcesusedinrectifyingthedefect.Thiscost
includesallthelaborcost,reworkcost,dispositioncosts,andmaterialcoststhat
havebeenaddedtotheunituptothepointofrejection.COPQdoesnotinclude
detectionandpreventioncost.
OEEbreakstheperformanceofamanufacturingunitintothreeseparatebut
measurablecomponents:Availability,Performance,andQuality.Eachcomponent
pointstoanaspectoftheprocessthatcanbetargetedforimprovement.OEEmay
OverallEquipmentEffectiveness
beappliedtoanyindividualWorkCenter,orrolleduptoDepartmentorPlant
(OEE)
levels.Thistoolalsoallowsfordrillingdownforveryspecificanalysis,suchasa
particularPartNumber,Shift,oranyofseveralotherparameters.
OEEiscalculatedwiththeformula(Availability)*(Performance)*(Quality)
Thetermdowntimeisusedtorefertoperiodswhenasystemisunavailable.
Downtimeoroutagedurationreferstoaperiodoftimethatasystemfailsto
provideorperformitsprimaryfunction.Reliability,availability,recovery,and
ProcessorMachineDowntimeLevel unavailabilityarerelatedconcepts.Theunavailabilityistheproportionofatime
spanthatasystemisunavailableoroffline.Thisisusuallyaresultofthesystem
failingtofunctionbecauseofanunplannedevent,orbecauseofroutine
maintenance(aplannedevent).
FCRiswhenthecustomersinquiryorproblemisresolvedinasinglecontact.FCR
isthepercentageofinitialcallsthatdonotrequireanyfurthercontactstoaddress
FirstContactResolution(FCR)
thecustomersreasonforcalling.Thecustomerdoesnotneedtocontactthecall
centeragaintoseekresolution,nordoesanyonewithintheorganizationneedto
followup.Ideally,FCRshouldbedefinedfromthecustomersperspective.
Thismetricshowhowpeopleaddvaluetoanorganization.Theformulais:
HumanCapitalValueAdded(HCVA)
Revenue(OperatingExpense[Compensationcost+BenefitCost])Total
NumberofFTE
Animportantratiothatlooksatacompany'ssalesinrelationtothenumberof
RevenuePerEmployee
employeestheyhave.Itiscalculatedas:
revenuetotal#ofemployees
EmployeeSatisfactionIndex(ESI)
Employeesatisfactionindexisanindextomeasuresatisfactionofemployeeinan
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EmployeeEngagementLevel
StaffAdvocacyScore
EmployeeChurnRate
AverageEmployeeTenure
AbsenteeismBradfordFactor
organization.
ESI=(totalpoint/totalquestion)*100.
Employeeengagementisapropertyoftherelationshipbetweenanorganization
anditsemployees.An"engagedemployee"isonewhoisfullyabsorbedbyand
enthusiasticabouttheirworkandsotakespositiveactiontofurtherthe
organization'sreputationandinterests.Anorganizationwith'high'employee
engagementmightthereforebeexpectedtooutperformthosewith'low'
employeeengagement,allelsebeingequal
StaffAdvocacyScoreisameasureoftheextenttowhichemployeesareadvocates
ofthebusiness.Itcanbemeasuredbyaskingasimplequestion:"Howlikelyisit
thatyouwouldrecommendthiscompanyasanemployertoafriend?"
Churnrate(sometimescalledattritionrate),initsbroadestsense,isameasureof
thenumberofindividualsoritemsmovingoutofacollectivegroupoveraspecific
periodoftime.Churnratecanalsodescribethenumberofemployeesthatmove
withinacertainperiod.Forexample,theannualchurnratewouldbethetotal
numberofmovescompletedina12monthperioddividedbytheaveragenumber
ofoccupantsduringthesame12monthperiod.Monthlyandquarterlychurnrates
canalsobecalculated.
Formula:
Attritionrate(%)=(Numberofemployeesresignedduringthemonth/Average
numberofemployeesduringthemonth)x100whereAveragenumberof
employeesduringthemonth=(Totalnumberofemployeesatthestartofthe
month+Totalnumberofemployeesattheendofthemonth)/2.
EmployeeTenurekeyperformanceindicatorshowshowlonganemployeeis
workingforagivencompany.EmployeeTenurecanbeexpressedasdurationin
days,months,years(sincehiredateuntiltodaysdateorthedatewhenthe
employeeleavesthecompany).ItisalsopossibletocalculateAverageTenureper
Employeeastheratiooftotaltimeofemploymentofallemployeestothetotal
numberofemployeeshiredbyemployer.Theformulathatcalculatesthisratio
lookslikethis:
AverageEmployeeTenureperEmployee=Totaltimeofemploymentofall
employees/Totalnumberofemployeeshiredbyemployer
TheBradfordFactororBradfordFormulaisusedinhumanresourcemanagement
asameansofmeasuringworkerabsenteeism.Thetheoryisthatshort,frequent,
andunplannedabsencesaremoredisruptivethanlongerabsences.
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TheBradfordFactoriscalculatedasfollows:
where:
360DegreeFeedbackScore
comparatio
TimetoHire
BistheBradfordFactorscore
Sisthetotalnumberofspells(instances)ofabsenceofanindividualovera
setperiod
Disthetotalnumberofdaysofabsenceofthatindividualoverthesame
setperiod
The'setperiod'istypicallysetasarolling52weekperiod.
Inhumanresourcesorindustrialpsychology,360degreefeedback,alsoknownas
multiraterfeedback,multisourcefeedback,ormultisourceassessment,is
feedbackthatcomesfrommembersofanemployee'simmediateworkcircle.Most
often,360degreefeedbackwillincludedirectfeedbackfromanemployee's
subordinates,peers(colleagues),andsupervisor(s),aswellasaselfevaluation.It
canalsoinclude,insomecases,feedbackfromexternalsources,suchascustomers
andsuppliersorotherinterestedstakeholders.
Theformulacommonlyusedbycompensationprofessionalstoassessthe
competitivenessofanemployeespaylevelinvolvescalculatingacomparatio.
ComparatioistheshortformforComparativeratio.Comparatioiscalculatedas
theemployeescurrentsalarydividedbythecurrentmarketrateasdefinedbythe
companyscompetitivepaypolicy.CompaRatiosarepositionspecific.Each
positionhasasalaryrangethatincludesaminimum,amidpoint,andamaximum.
Thesethreevaluesrepresentindustryaveragesfortheposition.ACompaRatioof
1.00or100%meansthattheemployeeispaidexactlywhattheindustryaverage
paysandisatthemidpointforthesalaryrange,Aratioof0.75meansthatthe
employeeispaid25%belowtheindustryaverage.Aratioof1.15comparatio
wouldmeantheemployeeispaidabovetheindustryaverage.
Timetofillisameasurementofhowlongittakesanorganizationtofillaposition
oncetheopeninghasbeenapproved.Itisanindicatorofhiringefficiencybut
shouldbebalancedwithcostandqualityhiringmeasures.
Timetofillismeasuredbycalculatingthenumberofdaysfromwhenthejob
requisitionwasreceived(RR)untiltheofferwasacceptedbythecandidate(AD)for
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eachjobfilledduringthemeasurementperiod.Positionsfilledbothwithinternal
andexternalcandidatesshouldbeincluded.
Thenumberofdaysopeniscalculatedusingcalendardays,includingweekends
andholidays.Aggregatethetotalnumberofcalendardaysthatyourtotalnumber
ofvacantjobswereopenandthendividebythenumberofpositionsfilledduring
themeasurementperiodthusprovidinganaveragewhichbalancesseasonaland
otherfluctuations.
TrainingReturnonInvestment
WorksCited:
http://en.wikipedia.org/wiki/Main_Page
http://www.wikinvest.com
http://www.businessdictionary.com
http://www.apinstitute.com
http://kpilibrary.com/
http://www.accountingtools.com
http://www.investopedia.com
TimetoFill=
TotalNumberofDaysofOpenedJobs
TotalNumberofJobs
Twocommonformulasforcalculatingreturnoninvestmentareabenefit/cost
ratioandReturnonInvestment(ROI).Tofindthebenefit/costratio,youdividethe
totaldollarvalueofthebenefitsbythecostasshowninthefollowingformula:
Benefit/CostRatio=(TotalDollarValueofBenefits)/(CostofTraining)
ROIisdeterminedbysubtractingthecostsfromthetotaldollarvalueofthe
benefitstoproducethedollarvalueofthenetbenefits,whicharethendividedby
thecostsandthenmultipliedby100todevelopapercentage:
CostsofTrainingTotalDollarBenefits=DollarValueofNetBenefits
DollarValueofNetBenefitsx100=ROICostsofTraining