Appendix 2: Financial indicators used to monitor Crown research institutes
Figure 10 shows the financial indicators used by the Ministry of Business, Innovation and Employment to monitor Crown research institutes.
Figure 10
Financial indicators used to monitor Crown research institutes
Indicator | Description | Calculation |
---|---|---|
Operating margin | The profitability of the company per dollar of revenue. | EBITDAF** / Revenue |
Profit per FTE* | The ability of the company to generate a return from its staff. | EBITDAF / FTEs |
Quick ratio | Adjusted ratio of current assets to current liabilities, adjusted for assets that cannot be liquidated quickly and liabilities that do not require cash to settle. | Current assets less inventory less prepayments / Current liabilities less revenue received in advance |
Interest coverage | The number of times that the company can cover interest expense with profit. | EBITDAF / Interest paid |
Profit volatility | The standard deviation of the past five year's profit, scaled by average profit. | Standard deviation of EBITDAF for past five years / Average EBITDAF for the past five years |
Forecasting risk | The average difference between forecast return on equity and actual return on equity for the past five years. | Five year average of return on equity less forecast return on equity |
Adjusted return on equity | Return on equity after removing the impact of fair value movements. | NPAT*** excluding fair value movements (net of tax) / Average of share capital plus retained earnings |
Revenue growth | Measure of whether the company is growing revenue. | % change in revenue |
Capital renewal | Measure of the level of capital investment being made by the company. | Capital expenditure / Depreciation expense plus amortisation expense |
* FTE = Full-time equivalent staff.
** EBITDAF = Earnings before interest, tax, depreciation, amortisation, and fair-value adjustments.
*** NPAT = Net profit after tax. Source: Ministry of Business, Innovation and Employment.
The Ministry of Business, Innovation and Employment also considers the following:
- revenue-growth by source;
- revenue per full-time equivalent staff member;
- cash/net debt/gearing; and
- interest cover.