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Evaluating a Firm’s Financial Metrics [Exercise A]
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Day 18 - Evaluating a Firm’s Financial Metrics [Exercise A] - Question 5
Not sure how the target revenue per month was arrived. Please explain. Thank you.
Great question @BlueBeacon001! According to the Profit-Loss Statement, the year-to-date budget for revenue is $397,500 at the end of June. In other words, $397,500 is the target revenue for a 6-month period. Therefore, $397,500 / 6 months = $66,250 target revenue per month.
Hope this helps!
Kiara Galicinao, AIA, NCARB
Product Coordinator
Black Spectacles
PcM Real World Practice Exams Question number 6:
The partners want to ensure the firm meets its net revenue per employee target of $198,750.
Which actions could help achieve this goal? Check the two that apply.
One of the answers that is not very clear to me: Reduce variable expenses.
Isn’t “Net Revenue Per Employee” NOR/ # of employees? How is net profit involved in this metric? One of the options mentions how reduce variable expenses can increase this metric, while NOR is way before variable expenses.
@nas.erickson great question! Your understanding of the formula is correct. While variable expenses do not directly affect this metric, the reasoning behind that answer is more about overall financial strategy. Reducing variable expenses improves overall profitability, which can reduce the need to hire additional staff or allow the firm to operate more efficiently with the same revenue. In that indirect way, it can help maintain or improve net revenue per employee.
Hope that helps!
Kiara Galicinao, AIA, NCARB
Product Coordinator
Black Spectacles