A company's ability to efficiently use its resources to generate income is crucial for its success. You can measure how efficiently a company is managing its workforce by calculating its operating income per employee, which equals a company's operating income over the past 12 months divided by its number of employees. Operating income is the core profit from a company's operations before other items, such as interest income or gains and losses from asset sales. The more operating income each employee can generate for a company, the more profitable a company can potentially be.
Things You'll Need
- 10-Q quarterly financial reports
- 10-K annual report
Find a company's operating income for each of its past four quarters on its quarterly income statements listed as either "Operating Income" or "Income from Operations." A public company's first- through third-quarter income statements are included in its 10-Q quarterly reports, and its fourth-quarter income statement is included in its 10-K annual report.
Calculate the sum of each of the past four quarters' operating income. For example, calculate the sum of each of the past four quarters' operating income of $12 million, $25 million, $16 million and $17 million. This equals $70 million in operating income for the past four quarters, which is also called the trailing 12-month operating income.
Find the number of employees of a company in its 10-K annual report.
Divide the company's trailing 12-month operating income by its number of employees. For example, divide $70 million in trailing 12-month operating income by 350 employees. This equals $200,000 in operating income per employee.
Tips & Warnings
- You can compare a company's operating income per employee with that of its competitors and its industry average to see how well it's managing its workforce compared with other companies.
- You can substitute other income amounts for operating income, such as net income, to calculate those amounts per employee.
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