Business – 1.3 Size of business – Measurements of business size | e-Consult
1.3 Size of business – Measurements of business size (1 questions)
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Both turnover and number of employees are common indicators of business size, but each has distinct strengths and weaknesses.
- Turnover
- Advantages: Directly reflects the scale of sales activity; useful for comparing businesses operating in the same industry; easy to obtain from financial statements.
- Limitations: Can be distorted by pricing strategies or one‑off sales; does not indicate profitability or efficiency; less meaningful for non‑trading entities.
- Most relevant for: Retail chains (high sales volume) and manufacturing firms where revenue is a key performance indicator.
- Number of Employees
- Advantages: Indicates the scale of operations and labour intensity; useful for assessing organisational complexity and human resource needs.
- Limitations: May vary widely due to automation or outsourcing; does not capture financial size; can be misleading for capital‑intensive businesses.
- Most relevant for: Service‑oriented businesses (e.g., consulting firms) and labour‑intensive industries such as hospitality.