This financial KPI refers to your total revenue minus the cost of goods sold, 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 your Gross Profit Margin, the more income you retain from each dollar of sales.Relevant Showcase Dashboard
This financial KPI shows the Operating Profit, also known as “Earnings Before Interest and Tax” (EBIT), as % 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.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.Relevant Showcase Dashboard
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 datapine, you can easily analyze and track your operating costs in detail. These break-downs 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 (over)proportionately?Relevant Showcase Dashboard
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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 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.Relevant Showcase Dashboard
Current Ratio is a liquidity ratio that measures your ability to pay your obligations in the short-term, often within the next 12 months. This financial metric is calculated by dividing your current liabilities (debt and accounts payables) by your current assets (cash, inventory and accounts receivables). 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 timely manner.Performance Indicators
The higher your current ratio, the more capable you are of paying your bills in the short-term. Bank often recommend a Current Ratio higher than 2.Relevant Showcase Dashboard
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 an 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.Relevant Showcase Dashboard
The Accounts Receivable Turnover measures how quickly you collect your payments owed and displays a company’s effectiveness in extending credits. This ratio 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 Ration the better and the more liquidity you have available to finance your short-term liabilities.Relevant Showcase Dashboard
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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 less assets required. This metric 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 ROA the better, especially compared to other companies in the same industry.Relevant Showcase Dashboard
Return on Equity (ROE) measures how much profit your company generates for your shareholders. 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 using it to compare the profitability among certain companies within the same industry.Performance Indicators
The higher the Return on Equity, the more value you are generating for your shareholders.Relevant Showcase Dashboard
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