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Finance for Non-Financial Managers
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in this metric means management is probably doing a pretty
good job.
Costs per Sales Dollar
There are various metrics that show costs per sales dollar, such
as sales and marketing costs per sales dollar and general and
administrative (G&A) costs per sales dollar. These are just two
examples of the kind of metrics that can be applied to any
number of operating expense items for which company man-
agement wants to tie expense growth to revenue growth. The
arithmetic looks like this, if you use our income statement data
for one of these calculations:
Sales and Marketing Costs 76,000
= = 11.7%
Gross Sales 650,000
This same ratio could be developed for administrative expens-
es, research and development, or any other grouping of operating
expenses. Many companies, once they’re established and they
have their infrastructure investment behind them, will try to asso-
ciate growth in certain expense categories with planned revenue
growth during the same period. This then becomes a useful way
to track progress in those cost control areas.

Measures of Financial Leverage
These metrics are related to the measures of financial condition
above in that they are based primarily on the balance sheet.
However, they fulfill a specific purpose: determining how well
the company is succeeding at using other people’s money to
improve the amount of resources it has working on producing
profitable transactions.
Debt-to-Equity Ratio
Recalling the discussion of ownership in Chapter 3, the assets
used in a company are provided either by the owners, through
capital investment, or by creditors, through the money they lend
to the company. The relationship between those two contribu-
tions is an important metric of a company’s financial health.