How To Calculate Magic Number in Sageworks | Arithmix

Calculating the magic number in Sageworks is a useful tool for businesses to determine their efficiency and profitability. It is a ratio that measures the relationship between revenue and assets, and it can provide valuable insights into a company's financial health. In this article, we will explore what the magic number is, when it is valuable to calculate it, and how to calculate it.

What Is Magic Number?

The magic number is a financial ratio that measures a company's efficiency in generating revenue from its assets. It is calculated by dividing a company's revenue by its total assets. The resulting number represents the amount of revenue generated for every dollar invested in assets. The higher the magic number, the more efficient a company is in generating revenue from its assets.

For example, if a company has \$1 million in revenue and \$500,000 in assets, its magic number would be 2. This means that for every dollar invested in assets, the company generates \$2 in revenue. A higher magic number indicates that a company is using its assets more efficiently to generate revenue.

When Is It Valuable To Calculate Magic Number?

Calculating the magic number is valuable for businesses in a variety of situations. For example, it can be used to compare the efficiency of different departments within a company or to compare the efficiency of different companies within the same industry. It can also be used to identify areas where a company may be over-investing in assets or where it may be underutilizing its assets.

Additionally, the magic number can be a useful tool for investors and lenders who are evaluating the financial health of a company. A high magic number indicates that a company is generating a significant amount of revenue from its assets, which can be a positive sign for investors and lenders.

How To Calculate Magic Number

Calculating the magic number is a simple process that involves dividing a company's revenue by its total assets. To calculate the magic number, follow these steps:

1. Determine the company's total revenue for a specific period of time (e.g., a year).
2. Determine the company's total assets for the same period of time.
3. Divide the company's total revenue by its total assets.
4. The resulting number is the magic number.

It is important to note that the magic number should not be used as the sole indicator of a company's financial health. It should be used in conjunction with other financial ratios and metrics to provide a more complete picture of a company's financial performance.

Conclusion

The magic number is a valuable tool for businesses to measure their efficiency in generating revenue from their assets. By calculating the magic number, businesses can identify areas where they may be over-investing in assets or where they may be underutilizing their assets. Additionally, the magic number can be a useful tool for investors and lenders who are evaluating the financial health of a company. By following the simple steps outlined in this article, businesses can easily calculate their magic number and use it to make informed financial decisions.

How Do You Calculate Magic Number in Sageworks

Sageworks itself isn’t naturally geared towards letting you calculate complex metrics like Magic Number. As an alternative, teams typically use products like Arithmix to import data from Sageworks and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Sageworks, combine it with data from other systems, and create calculations like Magic Number.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.