Price-performance ratio

As price-performance ratio is in the business administration , the procurement practices for public procurement , the private sector and in the area of spending economic indicator for the ratio between the cost ( price ) and a clearly defined power for goods and services designated. The phrase is also used in common parlance to express what you get “for your money”.

General calculation

The formula for the price-performance ratio is:

${\displaystyle {\text{Preis-Leistungs-Verhältnis}}={\frac {\text{Entgelt}}{\text{Leistungsumfang}}}}$ or

${\displaystyle {\text{Preis-Leistungs-Verhältnis}}={\frac {\text{Kosten}}{\text{Nutzwert}}}}$.

Example: A soccer player receives a transfer fee of € 1.5 million (costs), he has scored 40 goals (value in use) = € 37,500 per goal.

This general view is usually not sufficient to make a differentiated comparison of different offers. In the case of complex products in particular, the utility value itself is first determined as a key figure and then shown in the general formula.

Differentiated calculation

A closer look at the price-performance ratio is possible with the help of a benefit analysis of various services carried out in advance . The result of such a preselection can then be related to the price in the form of a meaningful key figure.

${\displaystyle {\text{Preis-Leistungs-Verhältnis}}={\frac {\text{Kosten}}{\text{Nutzwertkennzahl}}}}$.

Such a consideration is z. B. the document for tendering and evaluation of IT services ( UfAB ) in the extended reference value method for the award of public contracts. To do this, the price-performance ratio is determined:

${\displaystyle {\text{Preis-Leistungs-Verhältnis}}={\frac {{\text{Bewertungspunkte}}\cdot {\text{Gewichtungspunkte}}}{\text{Preis}}}}$.

In the advertising industry , too , the price-performance ratio is given as the cost per contact (CPM per thousand contact price ). It states what amount is paid to reach 1,000 people in the target group . The TKP thus clarifies the “price-performance ratio” in relation to the range.

In the area of ​​the stock economy , the Price-Earning to Growth-Ratio (PEG) expresses a kind of price-performance ratio for securities. It represents the price-earnings ratio (P / E) of the company in relation to the forecast long-term growth rate .

${\displaystyle {\text{Kurs-Gewinn-Wachstum}}={\frac {\text{Kurs-Gewinn-Verhältnis}}{\text{langfristige Wachstumsrate}}}}$

Here, the price-earnings ratio is divided by the long-term forecast earnings growth rate (as a "growth" element). A lower quotient expresses the attractive growth potential of the rated shares and the lower the respective share is rated. A PEG in the range of 1.00 is considered a fair rating. Price / earnings growth offers a longer-term perspective than price / earnings ratio.

See also

• distribution
• marketing
• profitability

Web links

Wiktionary: Value for money  - explanations of meanings, word origins, synonyms, translations

• Documentation by the Federal Cartel Office on procurement regulations (PDF file; 187 kB)
• UfAB VI: Document for tendering and evaluation of IT services. IT Commissioner of the Federal Government, accessed on December 5, 2017 . 
• Value for money for stocks
• PEG financial ratios