{"id":603,"date":"2023-09-18T13:25:03","date_gmt":"2023-09-18T13:25:03","guid":{"rendered":"https:\/\/www.oursglobal.com\/blog\/?p=603"},"modified":"2024-03-08T10:40:26","modified_gmt":"2024-03-08T10:40:26","slug":"15-key-financial-performance-indicators-influencing-your-business-value","status":"publish","type":"post","link":"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/","title":{"rendered":"15 Key Financial Performance Indicators Influencing Your Business Value"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<label class=\"ez-toc-title\" style=\"cursor:inherit\">In this article<\/label>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #0a0a0a;color:#0a0a0a\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #0a0a0a;color:#0a0a0a\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#Following_are_Fifteen_Key_Financial_performance_Indicators_Influencing_Your_Business_Value\" >Following are Fifteen Key Financial performance Indicators Influencing Your Business Value:\u00a0\u00a0<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#1Operating_Cash_Flow\" >1.Operating Cash Flow<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#2Working_Capital\" >2.Working Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#3Current_Ratio\" >3.Current Ratio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#4Debt_to_Equity_Ratio\" >4.Debt to Equity Ratio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#5LOB_Revenue_Vs_Target\" >5.LOB Revenue Vs. Target<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#6LOB_Expenses_Vs_Budget\" >6.LOB Expenses Vs. Budget<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#7Accounts_Payable_Turnover\" >7.Accounts Payable Turnover<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#8Accounts_Receivable_Turnover\" >8.Accounts Receivable Turnover<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#9Inventory_Turnover\" >9.Inventory Turnover<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#10Return_on_Equity\" >10.Return on Equity<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#11Quick_Ratio\" >11.Quick Ratio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#12Customer_Satisfaction\" >12.Customer Satisfaction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#13Gross_Profit_Margin\" >13.Gross Profit Margin<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#14Net_Profit\" >14.Net Profit<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.oursglobal.com\/blog\/15-key-financial-performance-indicators-influencing-your-business-value\/#15Debt_Asset_Ratio\" >15.Debt Asset Ratio<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">It is critical for businesses for maintaining time-to-time monitoring of their financial health. Defining critical key performance indicators, KPI&#8217;s helps businesses for measurement of their performance and guide them in taking effective strategies that benefit with a holistic view of business operations. This article is aimed at acknowledging businesses of such metrics that can be used for assessing financial performance in critical areas of the organization in better analysis and exponential business growth. Outsourcing our efforts and expertise through<strong>\u00a0OURS GLOBAL&#8217;s <a href=\"https:\/\/www.oursglobal.com\/outsource-financial-analysis-reporting-services\"> Financial Analysis &amp; Reporting Outsourcing Services<\/a> <\/strong>for 10+ years, we have helped numerous businesses to keep such indicators in mind and drive assessment of organizational performance.\u00a0 \u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">KPI&#8217;s can be a critical tool for the measurement and tracking of progress in critical business areas for delivering a comprehensive report of overall business health. Compiling insights from KPIs helps businesses to be proactive management of productive changes over performance lacking areas and preventing potentially serious losses. Quantification of KPI metrics drives skillful measurement of business efforts, assuring the long-term sustainability of the operating model, and helps optimize the base business investment. Prioritizing identification and understanding of the overall impacts driven by financial realities represented by KPI metrics over businesses. The insights compiled from such metrics can drive efficient financial management that helps businesses in the identification and implementation of result-oriented practices\/changes over policies, processes, personnel, or products.<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Following_are_Fifteen_Key_Financial_performance_Indicators_Influencing_Your_Business_Value\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>Following are Fifteen Key Financial performance Indicators Influencing Your Business Value:\u00a0\u00a0<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1Operating_Cash_Flow\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>1.Operating Cash Flow<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Comparing operating cash flow with a total capital employed as a ratio will help to get deeper insights into the overall business health, guiding capital investment decisions.\u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Operating Cash Flow = Operating Income (revenue \u2013 Sales cost) + (Depreciation \u2013 Taxes +\/- Variation in Working Capital)<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Monitoring and analyzing operating cash flow help the prompt payment of deliveries and routine operations of expenses.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Much useful for comparing total capital a business is using, they can also analyze revenue generation from a particular business operation from the support of capital investments made for the advancement of the business.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"2Working_Capital\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>2.Working Capital<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">The capital that can immediately make available for their requirements is called the working capital.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Working capital = current assets &#8211; current liabilities<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">The difference between the existing liabilities and assets, the working capital with Cash on hand, accounts receivable, short-term investments, accounts payable, accrued expenses, and loans on the part of this equation.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">This insightful KPI helps businesses to be well informed of business conditions based on available operating funds and how the available assets can suffice the short-term financial liabilities.\u00a0 \u00a0 \u00a0 \u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"3Current_Ratio\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>3.Current Ratio<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">The ratio of current assets and current liabilities gives the solvency of an organization.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Current Ratio = Current Assets \/ Current Liabilities<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">This is a clear indication of a business&#8217;s position in meeting financial obligations and helps maintenance of credit rating for growth and expansion.\u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Lower indicates a higher risk of distress or default whereas a higher current ratio inefficient management of assets.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"4Debt_to_Equity_Ratio\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>4.Debt to Equity Ratio<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Debt to Equity is a ratio calculated by looking at your business&#8217;s total liabilities in contrast to your shareholders&#8217; equity (net worth) revealing how profitable it is, ie the financial accountability of an organization.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Debt to Equity Ratio= (Short Term Debt+ Long term Debt+ Other fixed Payments) \/ Shareholders Equity\u00a0<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Indicating how well funds can be raised for profitability and growth by effective utilization of shareholder investment, the Debt to Equity ratio also reveals the accrued debt for becoming profitable.\u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"5LOB_Revenue_Vs_Target\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>5.LOB Revenue Vs. Target<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Tracking and analyzing discrepancies Revenue for a line of business (LOB Revenue) and business projections\/target reports the financial performance of each department.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Budget Variance 1 = LOB Revenue\/ Target\u00a0<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Budget Variance helps to the easy and accurate allocation of funds for requirements.\u00a0 \u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"6LOB_Expenses_Vs_Budget\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>6.LOB Expenses Vs. Budget<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Comparison of actual expenses to the budgeted amount helps businesses to identify where budgeted spending went off track and enables effective budgeting in the future.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Budget Variance 2 = LOB Expenses\/Budget<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">This budget variance KPI helps establishment of a smooth relationship between operations and finances.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"7Accounts_Payable_Turnover\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>7.Accounts Payable Turnover<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Revealing the rate how businesses pay off suppliers.<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Accounts payable turnover ratio= Average number of days due\/ 365\u00a0<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">This informative KPI indicates the duration a company takes to pay off its suppliers. An increase in ratio requires businesses to keep smooth relationships for taking advantage of time-driven discounts from vendors.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"8Accounts_Receivable_Turnover\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>8.Accounts Receivable Turnover<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Reflecting the rate of collection of customers due to payments, Accounts receivable turnover gives alerts for the requirement in the management of receivables helping to bring ideal payment collection rates within appropriate frames.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Accounts Receivable Turnover Ratio= Net Credit Sales\/ Average Accounts Receivable<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"9Inventory_Turnover\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>9.Inventory Turnover<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Assisting production and warehousing facilities, inventory turnover is the amount of turnover.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Inventory Turnover Ratio= Cost of Goods Sold\/ Average Inventory\u00a0 \u00a0<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Inventory turnover KPI indicates how much of average inventory has a company has sold in a period. Thus an accurate picture of company sales strength and production efficiency.\u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"10Return_on_Equity\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>10.Return on Equity<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Measurement of business&#8217;s net income to each shareholder equity, ROE indicates the appropriateness of net income to the company&#8217;s size.\u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Return of Equity= Net Income\/ Shareholders Equity<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Informing a business&#8217;s profitability and quantifies general operational and financial management efficiency.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Improvement or higher ROI is a clear indication of shareholder investments are optimized for business growth.<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"11Quick_Ratio\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>11.Quick Ratio<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">The ability to utilize liquidity assets for meeting short-term financial responsibilities, Quick Ratios KPI is a clear measurement of a company\u2019s wealth and financial flexibility.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Quick Ratio= Cash+ Accounts Recievables\/Current Liabilities<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">This conservative evaluation of a business&#8217;s fiscal health, Quick Ratio excludes inventories from assets and is the easiest way for assessing the wealth and health of a company.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"12Customer_Satisfaction\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>12.Customer Satisfaction<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">A company&#8217;s true potential for long-term success is in its customer satisfaction quantification. Calculation of the various levels of positive response that customers provide on very brief customer satisfaction surveys proves better results.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">NPS or Net Promoter Services is the accurate measurement of customer retention rate across revenue base and potential for generation of referral businesses&#8217; growth to that base.\u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"13Gross_Profit_Margin\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>13.Gross Profit Margin<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Checking the authenticity of the price of products or goods, the Gross profit margin is the overall profit gain without including fixed operations cost.\u00a0 \u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Gross profit margin = (revenue \u2013 the cost of goods sold)\/revenue<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Better margins are a clear indication of better profits.\u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"14Net_Profit\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>14.Net Profit<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Deducting total expenses from total revenue will get the Net profit.<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Net Profit= Total Revenue &#8211; Total Expenses<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Synonymous with profit, Net profit is the final measure of the profitability of a company.\u00a0\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<h3 class=\"wp-block-heading\" style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"15Debt_Asset_Ratio\"><\/span><span style=\"font-family: verdana, geneva, sans-serif; font-size: 14pt;\"><strong>15.Debt Asset Ratio<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Assets financed with debt, Debt Asset Ratio is the financial leverage used in the business. Higher Debt Asset Ratios indicates financial risk guiding businesses for the proper blend of shareholders\u2019 funds and debt wisely.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><strong>Debt Asset Ratio= Total Debts\/Total Assets\u00a0<\/strong><\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">This critical KPI determines the credibility of business for positive impressions from investors and customers.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">But Businesses must cater attention to KPI failures. Following are the reasons for KPI failures:\u00a0 \u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<ul class=\"wp-block-list\" style=\"text-align: justify;\">\r\n<li>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Inefficiencies in planning, or human error.<\/span><\/p>\r\n<\/li>\r\n<li>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Minimum vetting for KPI customization<\/span><\/p>\r\n<\/li>\r\n<li>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Over emphasization or under emphasization of KPI\u00a0<\/span><\/p>\r\n<\/li>\r\n<li>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Unclear business strategies\u00a0<\/span><\/p>\r\n<\/li>\r\n<\/ul>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">\r\n\r\n<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\">Thus it is critical for businesses for absolutely good or bad while considering financial KPI&#8217;s. Comparison of metrics from prior years or competitors for analyzing improvement or decline in financial performance and performance relative to others. A varied number of KPI&#8217;s helps businesses track and monitor how businesses understand how each of their actions can influence their finance and accounting operations.\u00a0<strong>Our GLOBAL&#8217;s<a href=\"https:\/\/www.oursglobal.com\/outsource-financial-analysis-reporting-services\"> Financial Analysis &amp; Reporting Outsourcing Services<\/a>\u00a0<\/strong>helps businesses to compile key performance metrics and guide businesses in designing effective strategies for the development of businesses. Avail of our service by contacting us by mail or call and enhance the scale and effectiveness of your investing.\u00a0<\/span><\/p>\r\n<p><span style=\"font-family: verdana, geneva, sans-serif; font-size: 12pt;\"><\/span><\/p>","protected":false},"excerpt":{"rendered":"<p>It is critical for businesses for maintaining time-to-time monitoring of their financial health. Defining critical key performance indicators, KPI&#8217;s helps<\/p>\n","protected":false},"author":1,"featured_media":605,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"colormag_page_container_layout":"default_layout","colormag_page_sidebar_layout":"default_layout","footnotes":""},"categories":[4],"tags":[],"class_list":["post-603","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-accounting"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.oursglobal.com\/blog\/wp-json\/wp\/v2\/posts\/603","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.oursglobal.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.oursglobal.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.oursglobal.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.oursglobal.com\/blog\/wp-json\/wp\/v2\/comments?post=603"}],"version-history":[{"count":6,"href":"https:\/\/www.oursglobal.com\/blog\/wp-json\/wp\/v2\/posts\/603\/revisions"}],"predecessor-version":[{"id":1095,"href":"https:\/\/www.oursglobal.com\/blog\/wp-json\/wp\/v2\/posts\/603\/revisions\/1095"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.oursglobal.com\/blog\/wp-json\/wp\/v2\/media\/605"}],"wp:attachment":[{"href":"https:\/\/www.oursglobal.com\/blog\/wp-json\/wp\/v2\/media?parent=603"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.oursglobal.com\/blog\/wp-json\/wp\/v2\/categories?post=603"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.oursglobal.com\/blog\/wp-json\/wp\/v2\/tags?post=603"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}