Revenue factor is calculated as which of the following?

• A. Revenue factor equals utilization rate times DSE multiplier; a value greater than 2 is good
• B. Revenue factor equals utilization rate plus DSE multiplier; a value greater than 3
• C. Revenue factor equals utilization rate squared; a value around 0.5
• D. Revenue factor equals 2 times utilization rate; any value is acceptable

Answer: (A)

Revenue factor measures how efficiently a firm turns billable time into revenue by combining two pieces: utilization rate (the portion of available time spent on billable work) and the DSE multiplier (how much revenue is generated per unit of direct salary). Because these factors scale together, they are multiplied to reflect their joint impact. A value above 2 signals strong revenue generation relative to direct costs, which is the benchmark for a healthy performance.

Using any other operation would misrepresent how revenue scales. Adding the components would blur the true combined effect; squaring the utilization would distort the metric and typically produce inconsistent values; and doubling utilization alone ignores the revenue-per-dollar aspect captured by the DSE multiplier.