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Top 18 Financial KPI Examples

Financial Key Performance Indicators and Metrics

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A financial KPI or metric is a measurable value that indicates a company’s financial results and performance, provides information about expenses, sales, profit, and cash flow, in order to optimize and achieve business’ financial goals and objectives.

The financial sector needs to regularly track, monitor, and analyze a company’s performance in order to keep a healthy status and avoid monetary bottlenecks. That’s why financial metrics have a special significance in every company, and the team that deals with them, needs proper dashboard reporting to effectively manage and optimize those processes. With the help of our list, you can create a complete financial dashboard that will enable you to interact with each metric and automate most of your reporting and analysis processes. By implementing these KPIs through the power of financial business intelligence, you have the opportunity to make your financial data and insights better, more informative, and easier to manage.

Here is the complete list of the top 18 finance KPIs and metrics, that every financial professional needs to know:

Gross Profit Margin: How much revenue you have left after COGS?

Operating Profit Margin: How is your EBIT developing over time?

Operating Expense Ratio: How do you optimize your operating expenses?

Net Profit Margin: How well your company increases its net profit?

Working Capital: Is your company in stable financial health?

Current Ratio: Can you pay your short-term obligations?

Quick Ratio / Acid Test: Is your company’s liquidity healthy?

Berry Ratio: Are you losing money or generating profit?

Cash Conversion Cycle: How fast can you convert resources into cash?

Accounts Payable Turnover: Are you paying expenses at a reasonable speed?

Accounts Receivable Turnover: How quickly do you collect payments?

Vendor Payment Error Rate: Are you processing your invoices productively?

Budget Variance: Is your budgeting accurate and realistic?

Return on Assets: Do you utilize your company’s assets efficiently?

Return on Equity: How much profit do you generate for shareholders?

Economic Value Added: How much profit do you generate for shareholders?

Employee Satisfaction: Will your team recommend you as a workplace?

Payroll Headcount Ratio: How do you utilize your labor force?

gauge chart illustrating the financial KPI gross profit margin percentage

GROSS PROFIT MARGIN

How much revenue you have left after COGS?

This financial KPI refers to your total revenue minus the cost of goods sold (COGS) or service delivered, divided by your total sales revenue. This KPI signifies the percent of total sales revenue that you keep after accounting for all direct costs associated with producing your goods and is an important measure of the production efficiency of your company. Direct costs include the price of materials and labor but exclude expenses such as distribution and rent. Let’s look at an example: If your gross profit margin last year was 40%, you would keep 40 cents out of every dollar earned and put it towards running your company by taking care of administration cost, marketing cost, and rent, among others.

Performance Indicators

The higher gross profit margin you manage to acquire, the more income you retain from each dollar of your sales.

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column Chart & gauge chart illustrating the financial KPI operating profit margin percentage

OPERATING PROFIT MARGIN

How is your EBIT developing over time?

This financial KPI template shows the operating profit margin, also known as “earnings before interest and tax” (EBIT), as a percentage of total revenue earned. It does not include any revenue earned from the firm's investments or the effects of taxes. It is calculated by dividing operating profit by your sales revenue. The operating profit margin measures how profitable your business model is and indicates what is left over from your revenue after paying for all operational cost. This can easily be done by using financial analytics software that can automate your calculations.

Performance Indicators

The higher the operating income, the more profitable you company is likely to be. If this number is declining then you need to quickly identify the reasons and take action.

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gauge chart displaying operating expense ratio

OPERATING EXPENSE RATIO

How do you optimize your operating expenses?

One of our next finance KPI examples, the operating expense ratio (OER), shows the operational efficiency of your company by comparing operating expenses (the cost associated with running your core operations) to your total revenue. The lower your company's operating expenses are, the more profitable your company will be. With modern KPI dashboards, you can easily analyze and track your operating costs in detail. These breakdowns are also useful when benchmarking your company against other organizations. As these numbers vary wildly by industry, when benchmarking please make sure to survey companies in a similar field. Investors are often interested in the operating ratio to specifically examine how high your operating costs are in relation to generated revenue.

Performance Indicators

Over time, changes in your company’s OER should inform you whether or not your company is scalable. Can you increase sales without increasing operating expenses?

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gauge chart displaying net profit margin percentage

NET PROFIT MARGIN

How well your company increases its net profit?

Net profit margin measures your profit after subtracting all operating expenses, depreciation, interest and taxes divided by the total revenue (net income x 100 / total revenue). The net profit margin is one of the most closely tracked KPIs in finance. It measures how well your company does at turning revenue into profits. As a percentage of sales, not an absolute number, it is often used to compare different companies and see which of them are most effective at converting sales into a profit.

Performance Indicators

The higher your net profit margin, the better off you are. Review any decline with a fine-toothed comb to fix any problems from decreased sales to unsatisfied customers ASAP.

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working capital calculation example with current assets and current liabilities

WORKING CAPITAL

Is your company in stable financial health?

The top financial KPIs wouldn’t be complete without the working capital. This KPI is not a ratio or proportion, but solely the number of dollars remaining after you subtract your current liabilities from current assets. Your assets include your cash, inventory, accounts receivable or prepaid expenses etc. and empower you to pay for ongoing operating expenses and fund standard business operations. On the other hand, current liabilities represent all the obligations or debts that are due within 12 months. That can include accounts payable, bank operating credit, accrued expenses, taxes payable, etc. This is one of our KPI examples that illustrates a company’s operational efficiency and short-term financial health, which is important in the process of financial reporting and analysis.

Performance Indicators

High working capital doesn’t automatically mean the company is performing extremely well. It can also mean that is not investing the excess cash.

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chart showing an important financial KPI on a monthly basis: the current ratio

CURRENT RATIO

Can you pay your short-term obligations?

We have included the current ratio as one of the top financial KPI templates that concentrate on liquidity. It measures your ability to pay your obligations in the short-term, often within 12 months. Unlike some other liquidity ratios, this one includes all current assets and liabilities. It is calculated by dividing your current assets (such as cash, accounts receivable, inventory, and prepaid expenses) by your current liabilities (accounts payable, credit card debt, bank operating credit, taxes, etc.). The goal is to have a ratio higher than 1. If your ratio is lower, you would be unable to pay off your obligations if they were suddenly due. This ratio is a key indicator of a company’s short-term financial health and shows whether you are able to collect accounts due in a reasonable amount of time.

Performance Indicators

The higher your current ratio, the more capable you are of paying your bills in the short-term. Banks often recommend a current ratio higher than 2.

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gauge charts comparing two important finance KPIs: quick ratio and current ratio

QUICK RATIO / ACID TEST

Is your company’s liquidity healthy?

We continue our finance KPI examples with the quick ratio. This metric takes into account just the short-term liquidity positions (the so-called near-cash assets) that you can convert into cash quickly. It is much more conservative about the assets since it doesn’t include all of them. It is also known as the acid test ratio, as it produces instant results. This KPI also expounds on the liquidity of a company but it should consider assets that can be easily converted into cash, usually within 90 days or so, such as accounts receivable.

Performance Indicators

The higher the ratio, the better your liquidity and financial health. In comparison to the current ratio your quick ratio will be always smaller, because it just includes near-cash assets. Your goal should be to have at minimum a quick ratio of 1,0.

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line chart showing financial KPI Berry Ratio for the last 12 months

BERRY RATIO

Are you losing money or generating profit?

Our list of the most important financial key performance indicators wouldn’t be complete without the berry ratio. This metric compares the gross profit of a company with its operating expenses, and you can use it to indicate the profit in a specific time period. If the coefficient is above 1, it means that your company is making profit above all variable expenses, while a coefficient below 1 will indicate that your company is losing money, therefore, it would make sense to look into this metric over a timeframe in order to monitor if the performance starts to drop. In our example, we can see that the ratio is above 2 which means that the company is generating a healthy amount of profit.

Performance Indicators

Track this metric over a set timeframe and ensure your coefficient stays above 1 in order to keep generating profit against variable expenses.

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see rich examples of interactive real-time kpis in datapine view our live financial dashboard
data visualization showing the cash conversion cycle for the last 3 years

CASH CONVERSION CYCLE

How fast can you convert resources into cash?

The cash conversion cycle (or CCC) is a quantitative measure that helps to evaluate how efficient a company’s operations and management processes are. It basically measures how long does it take for a company to convert its inventory investments and other resources into cash flows from sales. The mathematical formula for calculating CCC = DIO (days of inventory outstanding) + DSO (days sales outstanding) – DPO (days payable outstanding). A steady or decreasing CCC is a fairly good sign, but if it starts to rise, an additional analysis should be made. It also differs across industries based on the nature of business operations.

Performance Indicators

If a company is efficiently managing the requirements of the market and its customers, the cash conversion cycle will have a lower value.

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column chart of finance KPI accounts payable turnover ratio

ACCOUNTS PAYABLE TURNOVER

Are you paying expenses at a reasonable speed?

Accounts payable turnover is a short-term liquidity financial metric and shows how quickly you pay off suppliers and other bills. It is derived from your total purchases from vendors, divided by your average accounts payable, over a set period (total supplier purchases / avg. accounts payable). In other words, the accounts payable turnover ratio indicates how many times a company can pay off its average accounts payable balance during the course of a defined period, such as one year. For example, if your company purchases $10 million worth of goods in a year, and holds average accounts payable of $2 million, the ratio would be five. If your accounts payable turnover ratio is increasing, it means that you are paying your suppliers at a faster rate. The opposite would be the case when the turnover ratio is decreasing.

Performance Indicators

A higher ratio shows suppliers and creditors that your company pays its bills frequently and facilitates when negotiating a credit line with a supplier. On the other hand, paying your bills fast reduces your available cash.

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pie chart showing the accounts receivable turnover by payment target

ACCOUNTS RECEIVABLE TURNOVER

How quickly do you collect payments?

Our next KPI for finance is the accounts receivable turnover which measures how quickly you collect your payments owed and displays a company’s effectiveness in extending credits. This KPI measures the number of times that a company can collect its average accounts receivable and is calculated by dividing the amount of all supplier purchases by the average amount of accounts receivable for a given period. The faster your company can turn credit sales into cash, the higher your liquidity. A low accounts receivable turnover ratio signifies that there is a need to revise the company’s credit policies to ensure a more timely collection of payments.

Performance Indicators

The higher the accounts receivable turnover ratio, the better and the more liquidity you have available to finance your short-term liabilities.

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line chart showing the development of the vendor payment error rate

VENDOR PAYMENT ERROR RATE

Are you processing your invoices productively?

This is one of our financial KPI templates that focuses on the company’s diligence in issuing and paying vendors (creditors, suppliers) invoices. These errors may include payments made to the wrong entity, underpayments or overpayments, and fundamentally, it shows if the company has a stable accounts payable department. It is calculated with the total number of payments that contained an error divided by the total number of transactions over a period of time and expressed as a percentage. The goal is to keep this percentage as low as possible and deliver accurate and timely invoices (and payments). This will create stronger partnerships between companies.

Performance Indicators

A high percentage of the error rate clearly indicates that the controlling of procurement functions lacks efficiency. This can lead to vendor disputes.

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table chart showing the budget variance for different projects

BUDGET VARIANCE

Is your budgeting accurate and realistic?

The budget variance is one of our next financial KPI examples which expresses the difference between budgeted and actual figures for a specific accounting category. It can be favorable or unfavorable, each caused by various internal and external factors such as labor costs, poorly planned budget, natural disasters, changing business conditions, etc. The goal is to keep the revenue that comes in higher than budgeted, or expenses lower than originally predicted. That would ensure a greater income than expected. On the other hand, if revenues fall short of the budgeted amounts, expenses get higher, and the variance becomes unfavorable.

Performance Indicators

Keep your budgeting and assumptions realistic and accurate as possible to avoid unfavorable budget variance and, consequently, increase your expenses.

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chart showing return on assets development over time

RETURN ON ASSETS (ROA)

Do you utilize your company’s assets efficiently?

Return on assets is an indicator of how profitable companies are in relation to their total assets. This financial KPI is calculated by dividing your net income by the total assets. The assets of a company include both, debt and equity. The increasing ROA is a good indication since it states that either the company is earning more money with the same account of assets or it generates equal profits with fewer assets required. This KPI is important to potential investors because it gives them a solid insight into how efficiently management is using their assets to generate earnings or in other words, how effectively they are converting investments into net income.

Performance Indicators

The higher the return on assets (ROA) the better, especially compared to other companies in the same industry.

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chart showing return on equity development over time

RETURN ON EQUITY (ROE)

How much profit do you generate for shareholders?

Return on equity (ROE) measures how much profit your company generates for your shareholders. In other words, management often utilizes it to measure how effectively a company is using its assets to create profits. This metric can be calculated by dividing your company’s net income (minus dividends to preferred stocks) by your shareholder’s equity (excluding preferred shares). It is often used to compare the profitability among certain companies within the same industry. For example, if a tech company has a ROE of 20% compared to its peers that have an average of 17%, an investor can conclude that the management has above average results in using the assets to create profits.

Performance Indicators

The higher the return on equity, the more value you are generating for your shareholders. Keep in mind to compare the results within your industry.

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showing financial KPI Economic Value Added (EVA) with a gauge chart

ECONOMIC VALUE ADDED (EVA)

Do you generate true economic profit?

To calculate the economic value added (EVA), you need to deduct the costs of capital from the operating profit and adjust for taxes on a cash basis. This finance KPI example shows the value a company generates from funds invested into it. If the value is negative, the company is not generating value, and, on the other hand, if it’s positive, the company generates value from the funds invested. The basic formula to calculate EVA is as follows: net operating profit after taxes (NOPAT) - invested capital * weighted average cost of capital (WACC). You can see in our example an automatic calculation and immediately spot that the company generates value and has a positive EVA which is a positive sign of development.

Performance Indicators

Monitor EVA on a regular basis so that you get aware of the company’s wealth through assets and expenses in order to make better managerial decisions.

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Employee Satisfaction of the last 12 month

EMPLOYEE SATISFACTION

Will your team recommend you as a workplace?

We continue our financial metrics examples with the employee satisfaction levels depicted through the net promoter score (NPS) in our visual on the right. This isn’t a financial KPI per se, but it’s important to keep employees and customers satisfied as the ultimate goal, since low satisfaction levels from both will end up in worse financial metrics. We have also visualized the development over the course of a year so you can also use it as a trend indicator. That way, you can see which months have performed better or if you need some adjustments in your talent management processes. A quick trend overview, whether positive or negative, will enable you to immediately spot if your employees (or customers) are satisfied or not. Consequently, you can adjust your strategies, examine your data and people management, if you see that the satisfaction levels drop.

Performance Indicators

Use this metric to get a better overview of your people management processes, but dig deeper with other HR metrics in order to gain a complete overview.

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gauge chart monitoring Payroll Headcount Ratio

PAYROLL HEADCOUNT RATIO

How do you utilize your labor force?

The payroll headcount ratio is a metric you can calculate by dividing HR full-time positions with the total number of employees. You can include freelancers, part-time employees, and contractors, for example, to be able to evaluate, in the best possible manner, how well your company is utilizing its workforce. This metric basically shows how many people are engaged in the payroll process in comparison to the total number of employees. If the ratio is rising, it means that you’re adding labor costs so it might make sense to keep an eye on this metric so that you don’t experience potential financial difficulties.

Performance Indicators

Make sure your labor costs are well invested and bring positive financial gain. If you spend more than you earn, you need to reconsider your employment strategies.

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