Some key indicators based on predicted EBIT (earnings before interest and tax) have been calculated on the 2012/13 client budget data. EBIT is a measure of profitability used across various businesses and industries.
The average results for the top 20% of clients ranked on Return on Assets, along with the desired range are as follows:
Sales to Assets (sales/assets) 21% 10–20%
Interest Cover (EBIT/interest cost) 2.9 > 2
EBIT Margin (EBIT/sales) 24% 20–30%
Return on Assets (EBIT/assets) 4.9% 2–6%
The first ratio is a measure of operating efficiency and capital utilisation, the second a measure of debt servicing ability (comfort factor), while the last two are a measure of profitability. EBIT Margin is also a reflection of the risk profile of the business, with a high figure representing low costs relative to income.
The results above show that the top performing clients can achieve financial ratios comparable to other medium – to – large businesses outside agriculture.
The top 20% of clients ranked on Return on Assets have 18% less capital employed in their business than average. There is little variation between the groups in terms of Sales to Assets, but the top 20% group have average Interest Cover 71% better than average and average EBIT Margin 50% better than average, due to lower cost structures.