2000 Best Practices Study

VI. Financial Stability (Agencies with Revenues Between $2,500,000 and $5,000,000) 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

1.41:1

2.04:1

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)

11.2%

27.0%

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

68.8%

14.6%

2. Aged Receivables

Average

Top 25%

Over 60 Over 90

15.6% 20.3%

4.2% 2.9%

VII. Carrier Representation (Agencies with Revenues Between $2,500,000 and $5,000,000) Average +25% Profit +25% Growth Personal Lines National 5.9 5.7 4.9 Regional 4.0 3.0 2.6 Commercial Lines National 10.9 10.7 8.1 Regional 7.0 5.0 3.6 Total Carriers 27.8 24.4 19.1

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

17.6% 35.3%

16.5% 33.9%

12.9% 31.3%

Analysis of Agencies with Revenues Between $2,500,000 and $5,000,000

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