Industry Verticals

Key Ratios Benchmarks for PROFESSIONAL SERVICES Firms

Six key ratios particularly important for Owners of Professional Firms to monitor, project, and manage:

  • Pre-Tax PROFIT Percent
  • OPERATING EXPENSES Percent
  • CURRENT Ratio
  • DEBT-TO-WORTH Ratio
  • ACCOUNTS RECEIVABLE, Average Days Sales Outstanding
  • OFFICERS, OWNERS COMPENSATION Percent

Use the menu links to go to each Professional Firm industry to see their ratios. 

About The Key Ratios Benchmarks

The Professional Services Firms verticals featured at the Business Strata-G site reflect the definitions and designations of the North American Industrial Classification System (NAICS).

The source data is ProSight Financial Association's Annual Statement Studies. As you may know, ProSight collects financial statements from banks, and aggregates the findings for all industries. ProSight presents their data in 3 sections: the Top Quartile, the Middle Quartiles, the Bottom Quartile, for five different ranges of annual sales volume. Key Ratios Benchmarks posted on the Business Strata-G site are based on the Middle Quartile results.

Key Financial Ratios

The Formulas • Where to Find the Numbers • What Each Ratio Tells You

 

Ratio How to Calculate Your Key Financial Ratios Where to Find the Information What the Ratios Tell
Current Ratio Current Assets divided by Current Liabilities Your balance sheet Tests for solvency or ability to meet current debt obligations. Measures how well you can cover current liabilities with liquid assets.  (Higher is better; 2.0 is average.)
Quick Ratio Cash + Accounts Receivable divided by Current Liabilities Your balance sheet

Tests the degree of solvency most strictly, using only the most liquid current assets. 

(Higher is better; 0.5 is average.)
Debt-to-Worth Ratio Total Liabilities divided by Total Owner's Equity Your balance sheet

Compares what the company "owes" creditors to what it "owns." Measures the financial strength of the business.

(Lower is better; 1.0 is average.)
Inventory Turnover COGS (Cost of Goods Sold) divided by Average Inventory @Cost COGS are recorded on your income statement; Inventory is found on your balance sheet.

Measures how often, at present rate of sales, your entire inventory is completely sold and replaced during a given year. Measures inventory "velocity." 

(Higher is better; average depends on industry.)
Gross Margin % Gross Profit $ divided by Net Sales Your income statement (P&L) Indicates percentage of sales dollars remaining after costs related to purchasing merchandise are recognized.
Profit Before Taxes % Profit Before Taxes divided by Net Sales Your income statement (P&L)

Indicates percentage of sales dollars remaining after all costs (except taxes) are recognized.

(Higher is better; average depends on industry.)
Return on Assets (ROA) Profit Before Taxes divided by Net Assets Your income statement and balance sheet

Indicates pretax return on assets; measures productivity of assets. 

(Higher is better; average depends on industry.)
Gross Margin Return on Inventory (GMROI)  Gross Margin $ divided by Average Inventory @Cost Gross Margin - your income statement
Inventory @ Cost - your balance sheet.		 Measures the gross margin returned for each dollar invested in inventory. (Higher is better; average depends on industry.)