QualityQuick Ratio#43
Gross Profit per Employee is the metric used to how efficiently a company converts capital into earnings.
By Javier Sanz, Founder & Lead AnalystEditorially reviewed
Last updated: Reviewed by: Javier Sanz
Formula
(Current Assets - Inventory) / Current Liabilities
Description
A more conservative liquidity measure than the current ratio. It excludes inventory because inventory may not be quickly convertible to cash, especially in a downturn. Also called the "acid test" ratio.
Interpretation
Above 1.0 is generally safe, meaning the company can cover current liabilities without selling inventory. Below 0.5 may indicate a potential liquidity squeeze. Best used alongside the current ratio for a complete liquidity picture.
Related metrics: Return on Equity (ROE). (Updated 2026)
Further Reading
- SEC EDGAR primary filings on Gross Profit per Employee- Primary source filings used to calculate Gross Profit per Employee.
FAQ
How is Gross Profit per Employee calculated?+
Gross Profit per Employee uses the formula: (Current Assets - Inventory) / Current Liabilities. compare against sector median on /screener with the Sector filter applied. ValueMarkers refreshes the calculation within 24 hours of each new SEC filing using SEC EDGAR 10-K + 10-Q filings (segment-level disclosures).
What is a good Gross Profit per Employee value by sector?+
There is no single 'good' value for Gross Profit per Employee — context is sector-driven. compare against sector median on /screener with the Sector filter applied. The /screener exposes sector-relative percentiles for Gross Profit per Employee on every ticker, so you can compare against the sector median rather than the broad-market median.
Which investors use Gross Profit per Employee?+
Charlie Munger, Joel Greenblatt, Terry Smith cite Gross Profit per Employee as a key input to to find compounders with durable economic moats. The academic anchor is Greenblatt (2005) Magic Formula and Mauboussin (2014). ValueMarkers weights this within the Quality pillar of the VMCI score (30% of total).
What are the limitations of Gross Profit per Employee?+
Gross Profit per Employee can mislead in asset-light businesses where conventional capital ratios mislead. Pair Gross Profit per Employee with at least two cross-checks from other VMCI pillars — for example, free cash flow trend, balance-sheet quality, and earnings consistency — before drawing a single-metric conclusion.
Where can I see live Gross Profit per Employee data?+
Visit any /stock/[ticker] page on ValueMarkers to see live Gross Profit per Employee data, sector percentiles, and the VMCI composite score that integrates Gross Profit per Employee with 119 other indicators across 100,000+ stocks. The free /screener exposes Gross Profit per Employee as a filterable column.
Used in these guides
Related Quality Indicators
Return on Equity (ROE)Op Margin
Return on Equity measures how efficiently a company converts capital into earnings.
Return on Assets (ROA)Net Margin
Return on Assets is the metric used to how efficiently a company converts capital into earnings.
Return on Invested Capital (ROIC)EBITDA Margin
Return on Invested Capital measures how efficiently a company converts capital into earnings.
Return on Capital Employed (ROCE)FCF Margin
Return on Capital Employed is the metric used to how efficiently a company converts capital into earnings.
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