Financial KPI Cheat Sheet Financial data are crucial in indicating business success. However, most people are not sure about this data and have little or no idea what they mean. World’s well-known companies always aim to increase their Key Performance Indicators (KPIs), there are a small set of finance KPIs that are almost universally important. Revenue Growth Rate The sole purpose of a business’s existence is to make money. The primary way to achieve this is through creating, sustaining, and increasing income or revenue. Tracking this KPI will provide a better understanding of when, how and why your revenue is increasing or decreasing over a specific time period, and what changes could ensure that the revenue gains keep going north, instead of south. Also, if you want to attract investors for your business, the revenue can often be equally, if not …show more content…
However, care must be taken that you do not fall into the traps of thinking that profits are everything. There are many other metrics just as essential for ensuring sustainable profitability. Net Profit Margin Net profit margin is the percentage of the revenue which is net profit. Understanding the relation between how much money is flowing in, and how much money you get to keep is very important. This number helps us answer the question: “How much profit do we generate for every dollar made in sale?” If your profit margin is low, then even small changes in the operating environment could cause substantial decline in profits. By monitoring this over a time period, one can easily determine where lowering costs, or increasing revenue generation, has had the best impact on your profits. Gross Profit Margin Gross profit margin is the percentage of revenue which is gross profit. Unlike Net Profit Margin, here only the cost of goods sold is subtracted, rather than all costs. Hence it would always be