* Is High or Low Best: Lower is Better
Research & Development (R&D) Expense as a Percentage of Total Revenue measures the cost incurred by the company's R&D Department relative to total revenue generated by the company over the same time period. R&D Department expense should consume a relatively small portion of the company's assets, particularly in industries such as banking, where new product development is not as essential to revenue growth. On the other end of that spectrum, pharmaceutical companies and software companies will typically have higher R&D spending to keep a competitive advantage. In any case, relatively high R&D costs may be related to high work cycle times, overstaffing and/or general inefficiencies within R&D processes (e.g., idea generation, market research, product approval, product testing, etc.).
The total amount of research and development-related expense incurred divided by the total revenue earned by the company over the same period of time, as a percentage.
Two values are used to calculate this KPI: (1) the R&D expense that is incurred by the company, and (2) the total revenue generated by the company during the same measurement period. R&D expenses focus on labor (wages, salaries, benefits, etc.), overhead (occupancy, utilities, supplies, etc.) and technology costs related to idea generation, product testing, product design, etc. Only include non-interest income in the denominator of this calculation.
(Research & Development Expense / Total Revenue) * 100
This workflow template illustrates the development and testing of new products, including concept development, market analysis, initial stage gate approval, prototype development and prototy...
Type : Workflow Template
Process Participants : Product Development Staff, Research & Development Staff, Product Managers, Engineering & Design Staff, Market Research & Analysis Staff, Line of Business (LoB) Executives
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