Growth Capacity Benchmark Calculation

May 10th, 2019

Growth Capacity

How it’s calculated

((Net Profit (bos) – Current assets – Current liabilities) / Total Income) * 100

See our for explanation of Net Profit (bos) (link to https://www.benchmarking.com.au/net-profit-benchmark-calculation/)

How it’s used

Growth Capacity is a benchmark which shows whether the business can afford to fund its growth. If the result here is a large positive number, then ‘growth’ should be reasonably easy to fund; if the result is negative, then growing the business will demand more working capital than the additional profit which is generated. A negative (or even a low positive result) is therefore a warning sign. To improve this ratio, either work to increase the ‘profit’ aspect of the equation, or work to reduce the working capital requirements of the business.

Accountants and Business Advisors, Have you taken advantage of the Benchmark Suite FREE trial? Get started today

Recent Articles

Getting the Most out of Personnel Productivity Benchmarks

09th September 2019

As with any ‘ratio’, personnel productivity is best measured by linking an ‘input’ to an ‘output’. The key ‘input’... Read More

Manage Your Client’s Margin – Spend Better Before Spending More

06th September 2019

If your client has a gross profit margin problem, what is the natural reaction you are going to get... Read More

Why Advisors Should Benchmark Their Clients Against Competitors

09th August 2019

As a business owner, competition can be intimidating.  However, it can also drive to achieve impressive results. The important... Read More

Categories