What does the revenue per employee ratio measure?

• A. The total revenue generated by the firm
• B. The average revenue contribution of each employee
• C. The number of employees working at the firm
• D. The productivity of individual departments

Answer: (B)

The revenue per employee ratio is a key performance indicator used to assess a company's efficiency and productivity in generating revenue relative to its workforce. By calculating this ratio, an organization can gauge the average revenue contribution of each employee to the overall financial performance.

This metric is particularly useful for identifying trends over time, comparing performance against industry benchmarks, and evaluating how effectively a company utilizes its human resources. When revenue per employee is high, it often suggests that the firm is efficiently managing its employees and operations to maximize output.

While other options mention aspects of a company's performance or workforce, only the option relating to the average revenue contribution directly addresses what the revenue per employee ratio specifically measures. For instance, total revenue alone does not provide insight into the performance of each employee, and the number of employees does not reflect individual contributions. Similarly, productivity at the departmental level involves a broader assessment of outputs and inputs rather than focusing on the individual employee's impact on revenue.