The KPI Dashboard – Evolved
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# KPI Examples.

Financial KPIs, Metrics, and Ratios.

Financial KPIs and metrics are the ultimate measure of your organization's performance, whether your business is small or large. These are the measurements your stockholders, potential investors, and customers will use when assessing the performance of your business. That's why these financial metrics are an integral part of any executive or enterprise dashboard. By providing decision-makers with the right data, they can direct business initiatives more confidently to improve the performance and profitability of the entire organization.

To help get you started on your executive dashboard, we've put together a list of the top 10 financial ratios and metrics your business should monitor.

1. Gross Profit Margin. This financial KPI is an indicator of profitability that tells you how much you make on each dollar of sales before expenses. This ratio is calculated by looking at the difference between production costs (excluding overhead, payroll, and taxes) and sales revenue. It is important to note that gross profit margin isn't a true indicator of whether your business is making a profit – for that you will need the next financial KPI on this list: net profit margin.
Audience: Executives, Managers
Calculation: (Revenue – Cost of goods sold) / Revenue
1. Net Profit Margin. This financial KPI determines how effective your business is at generating profit on each dollar of revenue you bring in. As a measure of profitability, this financial KPI is instrumental for making long- and short-term financial decisions. Understanding this KPI may even give you an advantage in a pricing war with your competitors.
Audience: Executives, Managers.
Calculation: Net Income / Sales
1. Current Ratio. This is an important financial metric to monitor because it provides an assessment of your organization's ability to pay all your debts over a given period. This metric takes a measurement of your current assets, such as unpaid invoices and current liabilities, to help you understand the solvency of your business. A ratio of 1 or more is preferable, although there is some flexibility depending on the length of your operating cycle and industry-specific operations.
Audience: Executives, Banks and Lenders.
Calculation:Current Assets / Current Liabilities
1. Quick ratio / Acid Test. This financial metric is similar to current ratio, except that it is a more conservative assessment of your finances since it doesn't include your inventory among your current assets. This is logical since it may not be possible to move inventory quickly enough to bolster your short-term financial assets. As with current ratio, you want a value greater than 1.
Audience: Executives, Banks and Lenders.
Calculation: (Current Assets – Inventory) / Current Liabilities
1. Inventory Turnover. This financial KPI shows how often you are able to turn over your inventory each year. Depending on the type of operation you manage, this KPI may be very important to monitor because it shows your ability to generate sales and move aging inventory. A high turnover rate is desirable, but it shouldn't come at the expense of slashing prices or disrupting normal operations.
Audience: Managers, Executives.
Calculation: (Total Sales - Cost of Sales) / (Inventory remaining at end of year) = Times inventory turns over per year
1. Return on Equity. This financial KPI measures your organization's profitability by examining your ability to generate profit for each unit of shareholder equity. A high ROE tells current and potential investors that your company is able to generate growth from existing investments. A low ROE may be troublesome, as it will erode faith in your organization's ability to return on your shareholders' investments.
Audience: Executives, Managers.
Calculation: Net Income (After Taxes) / Average Shareholder Equity
1. Accounts Payable Turnover. This financial metric measures the rate at which your company pays off its suppliers and other expenses. This ratio is important for knowing the amount of cash that your business spends on suppliers during any given period. It shows how many times over the course of the year your business is able to pay off its accounts payable. Used in conjunction with Current Ratio or Quick Ratio, this financial metric shows your ability to meet your financial obligations.
Audience: Executives, Managers.
Calculation: Total Supplied Purchases / Average Accounts Payable
1. Accounts Receivable Turnover. This financial metric measures the rate at which you collect on outstanding accounts. The problem in maintaining a large bill for a customer is that you may actually be extending them a loan without making any interest on that loan. Monitoring this metric will help you collect accounts receivable in a timely manner. This metric is an essential piece of the puzzle when it comes to understanding your cash flow.
Audience: Executives, Managers.
Calculation: Net Credit Sales / Average Account Receivable
1. Debt-to-equity ratio. This financial KPI measures how your organization is funding its growth. A high debt-to-equity ratio is indicative of an organization fuelling growth by accumulating debt. This may be a good thing, as outside debt can increase your ability to generate profit and extend your reach further than your equity can afford. Reaching too far, however, can backfire and leave the company bankrupt and your investors with nothing to show for their original investment.
Audience: Executives, Managers, Bank and Lenders.
Calculation: Total Liabilities / Shareholders Equity
1. Working Capital. This financial metric is a measure of your organization's financial health and ability to meet any short-term obligations. The example on the left shows different types of assets that can be included in this metric. This metric will be used when considering other financial ratios on this list, such as accounts receivable, inventory turnover, and accounts payable.
Calculation: Current Assets – Current liabilities
Example: \$4.5M – \$3.0M = \$1.5M