More detailed analysis is required
As well as comparing two accounts figures such as costs to sales to reveal relationships, if these are available over two or more years then trends relating other data to pure financial data can be helpful in understanding a business and what intentional strategies (or otherwise) are at play.
Asset utilization for a telecoms company could be revenue per domestic customer or, at a high level, the percentage of available fibrotic cables lit, that is, in use. Such analysis may be considered as management accounting or 'analytics' and these topics are covered in more depth in Chapter 9.
Using data from the BT accounts, Table 7.14 shows an analysis of employee costs using three years' data from the published accounts.
TABLE 7.14 BT pic - employee costs
1 Staff costs as a percentage of sales are increasing - is this the planned strategy?
2 The number of employees has fallen each year. In the 200x accounts, the following statement was made: 'In order to transform the company, we need to drive significant cost saving. Regretfully this has meant a reduction in our workforce.' So presumably this is the strategy playing out.
3 Revenue per employee has also steadily fallen. Is this simply a reality - competition in the telecoms sector? The average staff costs per employee has fallen slightly in 2013. Again, is this a strategy or economic reality - austere times?
Answers to these questions may be found in the accounts and other press releases. Certainly analysts ought to know - they are paid to track the figures and relate to the economy, and to carry out more than just some ratio analysis, that is, carry out a proper analytical review as outlined below.
The point for readers is that your strategies will be revealed in the numbers. Other businesses' strategies will also be revealed - can you learn from them?