What Does a Financial KPI Mean?

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Basically, a financial KPI is a type of performance indicator used by a company to measure the success of its business. These KPIs may report changes in sales, expense categories, or other areas. Keeping track of these financial KPIs can inform your business’s strategy. A KPI dashboard can also automate the process of tracking your ROI.

The gross profit margin is a key financial KPI that shows how much of your total sales revenue is kept after you subtract costs of producing the product. This can give you more insight than simply reviewing the gross profit. It’s also an important metric to use when measuring your business’s performance.

The current accounts receivable measure is a key financial KPI because it calculates how much of your debtors’ money you are owed. This helps you gauge how much money you will earn in the upcoming months. It also shows you how efficient your payment collection process is.

The return on assets measure is another key financial KPI because it shows how efficiently you are converting investments into income. It also shows how effectively you are using your shareholder investments. This can help you attract investors. It’s also a good metric to use to assess your business’s growth opportunities.

The Acid Test is another key financial KPI because it shows whether your business can pay off short-term liabilities. It’s not as forward-looking as the current ratio, but it does give you a better idea of how well your business will be able to pay its short-term obligations.

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