2000 Best Practices Study

VI.

Financial Stability (Agencies with Revenues Between $500,000 and $1,250,000)

A. Current Ratio A current ratio greater than 1:1 indicates that cash and assets with short-term maturities are sufficient to meet a firm's short-term obligations.

Average

Top 25%

Liquidity/Current Ratio

1.50:1

2.05:1

B. Tangible Net Worth The tangible net worth is an important measure as it represents the net value of the corporation if it were liquidated. A low or negative tangible net worth impacts a firm's ability to invest in new opportunities, develop new products, hire new employees, make other capital expenditures and handle stockholder redemption obligations.

Average

Top 25%

Tangible Net Worth (as a % of Net Rev)

5.5%

20.3%

C. Receivables 1. Receivables/Payable Ratio

This factor measures the collection practices of an agency, with a lower ratio representing more timely collections. (Calculated by dividing total receivables by total payable at a given point in time.)

Average

Top 25%

Receivables/Payables Ratio

32.2%

-23.7%

2. Aged Receivables

Average

Top 25%

Over 60 Over 90

-2.8% 12.9%

7.1% 6.2%

VII. Carrier Representation (Agencies with Revenues Between $500,000 and $1,250,000) Average +25% Profit +25% Growth Personal Lines National 3.1 3.7 3.3 Regional 3.6 2.5 2.8 Commercial Lines National 4.0 4.3 4.5 Regional 3.3 3.5 3.0 Total Carriers 13.9 14.0 13.7

% of Net Rev from Top Carrier % of Net Rev from Top 3 Carriers

31.4% 47.9%

29.4% 54.6%

22.7% 41.9%

Analysis of Agencies with Revenues Between $500,000 and $1,250,000

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