Thursday, July 7, 2011

Sector-specific performance measures

Revenue, profits and many more generic financial returns and earnings measures (e.g., ROE, ROA, EBITDA, EPS etc.) are used pervasively in practice as well as in business research. This article however suggests, in some business sectors, practioners often create simple yet more specific measures of performance or growth which could better capture the essence and subtlety of the sectors' operational traits than the ordinary measures.

For example, railroad operators use "intermodal volume" and "number of containers shipped" to measure their shipping volumes; steelmakers use "operating profit per ton" to show whether the companies' productivity has improved while energy, labor and raw-materials have been properly managed; and the key performance measure in hotel chains is the so-called "revenue per available room", which reflects average room rates and daily occupancy.

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