Financial ratios and ROI drivers

ROI is an important measure for assessing shareholder value and is underpinned by two main drivers  

Return on investment Administration costs as % of sales Labour costs as % of sales 

Section 3.2 of this chapter tackles the issues concerning the visibility of costing information. This form of analysis can be applied to benchmark an existing operation with a competitor, or it can be used to assess the implications on ROI against potential trade-offs (see section 1.4.3), such as comparing an in-house operation with a third party outsourcing alternative. 

The use of financial ratios in relation to time are key to monitoring working capital and the cash to cash cycle. Key time-related ratios include  

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