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Industry benchmarks
Te Paearu Ahumahi
Formula

Gross profit divided by sales and/or services

Box 6 divided by Box 2 [in your IR10 form]

Definition

Gross profit indicates how much profit is made after paying for the cost of goods sold (the direct costs attributable to the production of goods and supplies such as inventory and stock). The gross profit ratio, also known as gross margin, represents gross profit expressed as a percentage of income from sales and services. Gross profit ratios vary by industry and business. The higher the gross profit margin the more efficient a business. A low gross profit ratio may indicate that a business is not charging enough for its products and services, or is paying too much for its supplies and stock.

Formula
Definition

A benchmark is a standard or reference that allows comparisons to be made. Industry benchmarks have been developed to help you assess your business performance, by comparing your business with others in your industry. They also provide guidance on what figures we expect to see a business in your industry report.

Formula

Total current year taxable profit divided by (sales and/or services plus interest received plus dividends plus rental and lease payments plus other income)

Box 29 divided by (Box 2 plus Boxes 7, 8, 9 and 10) [in your IR10 form]

Definition

Taxable profit ratio represents the profit percentage of total sales after taking into consideration all business expenses. While the gross profit ratio only includes the direct cost of making the supplies such as purchases, the taxable profit ratio takes the gross profit and all other costs and income into account. This would include the cost of premises, electricity, wages and any other expenses incurred in generating turnover. Sustained low or negative (loss) profit ratios can indicate that a business is not performing efficiently. A high profit ratio can indicate good business performance.

Formula

Cost of goods sold divided by ((opening stock plus closing stock) divided by 2))

(Box 3 plus Box 4 minus Box 5) divided by ((Box 3 plus Box 5) divided by 2)) [in your IR10 form]

Definition

Stock turnover, also known as inventory turnover, represents the number of times stock is sold and replaced within a year. A high stock turnover may indicate:

• a high-volume low-mark-up business model,
• that the business is holding very low stock levels, or
• that the business has a lot of wastage.

A low (also known as slow stock turnover) turnover may indicate:

• a low-volume high-mark-up business model,
• that a business has too much money tied up in stock, or
• the business holds high levels of out-of-date or unsaleable items.

Formula

Salaries and wages divided by (sales and/or services plus interest received plus dividends plus rental and lease payments plus other income)

Box 23 divided by (Box 2 plus Boxes 7, 8, 9 and 10) [in your IR10 form]

Definition

This ratio represents the percentage of turnover income that is spent on labour costs. It can be an indicator of whether a business is spending too much or too little of its turnover income on staffing the business.

Formula

Total current year taxable profit divided by total assets

Box 29 divided by Box 45 [in your IR10 form]

 

Definition

The return on total assets represents the ratio of net income to assets. This ratio tests the efficiency of investment in fixed assets and is a measure of how effectively the business has converted these assets into net income. The higher the ratio, the more efficient a business is. The lower the ratio, and a negative ratio (loss), the less efficiently the business has used the assets.

Formula

Total current year taxable profit divided by total proprietor or shareholder funds

Box 29 divided by Box 54 [in your IR10 form]

Definition

The return on equity represents the rate of return earned on the owner’s equity and investment. It measures the business’s efficiency at turning equity (assets less liabilities) into profit. The higher the ratio, the more efficient a business is, whereas the lower the ratio, and a negative ratio (loss), the less efficiently the business has used the owner’s investment.

Formula

Total current assets divided by total current liabilities

Box 33 divided by Box 49 [in your IR10 form]

Definition

The current ratio represents the ratio of current assets to current liabilities and gives an indication of a business’s ability to pay its short term liabilities. A ratio less than 100 indicates that current liabilities are greater than current assets and that the business may struggle to pay its short-term debts. A ratio higher than 100 means a business should be able to pay its short-term liabilities. The ability to meet current liabilities in the short-term is often dependent on how liquid the current assets are.

Formula

(Total current assets minus closing stock) divided by total current liabilities

(Box 33 minus Box 5) divided by Box 49 [in your IR10 form]

Definition

The quick ratio, also known as the acid test, is very similar to the current ratio, but excludes stock. It tests a business’s ability to pay short-term debt from immediately convertible or liquid assets (that is assets that can be readily converted to cash such as debtors, bank or cash on hand). A ratio higher than 100 means a business should be able to pay its short-term liabilities immediately or within a very short timeframe. If the ratio is very high it may mean that the business has few current liabilities or that the quick/cash assets are very high. A ratio lower than 100 means a business could have difficulty meeting all of its short-term liabilities.

Formula

Total proprietor or shareholder funds divided by (total proprietor or shareholder funds plus total liabilities)

Box 54 divided by (Box 54 plus Box 51) [in your IR10 form]

Definition

The liability structure ratio represents equity solely as a proportion of equity plus liabilities. A low ratio indicates a low level of owner’s equity in the business, and a higher risk to debt holders. A high ratio indicates a high level of owner’s equity in the business, and a lower risk to debt holders.

Find your industry benchmarks

The industry benchmark figures on this site are provided by Statistics New Zealand.

 

Currently industry benchmarks are available for 45 industries, based on data from the 2011/2012 financial year.

The features on these pilot industry benchmarks webpages will be enhanced over time and cover more industries. If your industry's benchmarks are yet to be published, you may wish to check again next year. If your industry's benchmarks have been published, we recommend that you review your benchmarks regularly. We will update these benchmarks each year.

Industry benchmarks are currently available for the following industries:
Grouped by industrial classification

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Accommodation & food services

Includes; cafes and restaurants, pubs, taverns and bars, and takeaway food services.

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Agriculture

Includes; nursery production (outdoors).

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Wholesale trading 

Includes wholesaling of; agricultural and construction machinery, electrical and electronic goods, and groceries.

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Retail trade

Includes retail of; clothing, food, furniture, computer, vehicle, and sport related items.

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Construction services

Includes; house, residential and non-residential construction, painting and decorating, and bridge and road construction.

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Manufacturing

Includes manufacturing of; bakery products, wine and alcoholic beverages, wooden structural fittings and components, wood and concrete products, fabricated and structural metal products, and architectural aluminium products.

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Education & training

Includes; preschool education.

Can't find your industry?

As industry benchmarking is dependent on several factors including the size of the industry and the availability of specific data, not all industries are able to be included.

Six industries originally included in the benchmarking initiative have been removed from industry benchmarking until further research can be done by Inland Revenue and Statistics New Zealand to determine financial ratios that can provide more assistance.

The industries that have been removed are:

  • Electrical services (E3232)
  • Landscape construction services (E3291)
  • Passenger car rental and hiring (L6611)
  • Real estate services (L6720)
  • Gardening services (N7313)
  • Hairdressing and beauty services (S9511)

Download benchmarks for all industries 2011/2012
XLS document | 66kb

If your industry is not available, please contact Statistics New Zealand as they may be able to assist. For further information phone 0508 525 525 or email info@stats.govt.nz.

 

 


Date published: 02 Apr 2014

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