REVENUE 
1 THE TOTAL ASSETS RATIO 
The term “productivity” is used in the above title to indicate 
capacity to produce revenue by the sale of service. For the present 
purposes security investments and income from securities have been 
eliminated from the financial statements in the process of standardizing 
the classification so that the figures used show operating results only. 
Two ratios are selected as particularly fitted to picture this revenue 
producing capacity. The first one is the ratio of Gross Revenue to 
Total Assets and expresses the number of cents of annual gross 
revenue per dollar of total assets invested at the end of the year. It 
shows the financial productiveness of the service producing (i. e., op- 
erating assets) investment. The ratio may be stated in cents per dollar 
as, $.164 per $1, or may be cast into the form of a percentage by moving 
the decimal point as, 16.4 (i. e., 16% cents per dollar). The latter form 
1s the one generally used throughout the bulletin. A relatively large 
ratio, such as .18 or .20 for example would indicate that a highly efficient 
use of the assets was producing a large return for each dollar invested. 
Conversely a low ratio like .02 or .06 would indicate over-investment in 
plan or inefficient operating conditions. 
The second of the two ratios to be analyzed is the ratio of Gross 
Revenue to Net Worth which will be examined in Part II of this bulle- 
tin. Tables for a third ratio, Gross Revenue to Fixed Assets are included 
in the Appendix for reference, but are not discussed in the text because 
these ratios are so nearly like the ratios of revenue to total assets. 
In general, the procedure will be to analyze the two ratios sepa- 
rately, supporting the analysis by suitable tables in an appendix and 
by bar-charts accompanying the text. The tables are constructed to 
show “frequency distributions,” that is to say, to show the way the 
hundreds of ratios fall into groups. In the charts each vertical bar 
represents a ratio-group, as for example, the ratios which fall between 
.12 and .16; the length of the bars gives a relative measure of the number 
of cases which fall in each group. In order to secure greater ease in 
making quantitative comparisons, the number of cases in each ratio- 
University of Illinois, Bureau of Business Research Bulletin No. 9—The Current 
Ratio in Public Utility Companies contains further notes in regard to the standardiza- 
tion of financial statements preliminary to statistical analysis. 
{5.9