Question

Ratios are utilized to assess the financial well-being and health of an organization. Please select two ratios and explain why the calculation would be important to an engineer manager?

Answer 1

The two financial ratios important for engineer managers are:

• Net Profit Margin-Given by Net Profit/Net Sales. The net profit margin is a number which indicates the efficiency of a company at its cost control. A higher net profit margin shows more efficiency of the company at converting its revenue into actual profit. This ratio is a good way of making comparisons between companies in the same industry. Often it helps a manager to deploy measures to balance the cost margin of the product.
• Fixed asset turnover Ratio: Although fixed assets represent only one type of assets a company owns, in many cases they are the largest share of the total asset pool. Fixed-asset turnover, then, is a ratio which aims to measure how productive a company’s fixed assets are when it comes to generating sales. The higher that the yearly turnover rate on these assets is, the better the company is at managing them and using them to generate sales.