There are some Key Performance Indicators (KPIs) that will deliver even more information about performance in a variety of areas. Some commonly used financial KPIs include.
Gross Profit Margin
- To know whether you are appropriately pricing your goods and services.
- Gross profit margin = (revenue – cost of goods sold) / revenue.
- This margin should be sufficient enough to take care of your fixed operating expenses and then leave you with a reasonable profit at the end of the period.
Net Profit Margin
- This ratio indicates how much of your revenue is profits.
- Net Profit margin = net profit/ total revenue. This is a good benchmark to use for setting profitability goals.
- This ratio quickly tells you how liquid your business is at a given point in time.
- Current Ratio = current assets/ current liabilities.
- A Current ratio of less than 1 means that you don’t have enough cash to pay your bills.
- A more ideal figure is between 1 to 1.5