Basedonourprojections,SiriusRadiocanexpecttocontinue
reporting operating losses for the nextfour years, but the
margins will improve over time to 20% (in year 11).
Sales-to-Capital Ratio
High revenue growth is clearly a desirable objective,
especially when linked with positive operating margins in
futureyears.Firmsdo,however,havetoinvesttogenerate
bothrevenuegrowthandpositiveoperatingmarginsinfuture
years.Thisinvestmentcantaketraditionalforms(plantand
equipment)but itshould also includeacquisitions of other
firms,partnerships,investmentsindistributionandmarketing
capabilities, and research and development.
Tolinkrevenuegrowthwithreinvestmentneeds,welookat
the revenues that every dollar of capital that we invest
generates.Thisratio,calledthesales-to-capitalratio,allows
ustoestimatehowmuchadditionalinvestmentthefirmhasto
make to generate the projected revenue growth. This
investment can be in internal projects, acquisitions, or
workingcapital.To estimatethereinvestmentneeds inany
year,wedividetherevenuegrowththatwehaveprojected(in
dollarterms)bythesales-to-capitalratio.Thus,ifweexpect