37+ Best Financial, Operating, Investing, and Business Metrics

The quality of a company and which financial, operating, investing, and business metrics to use to assess it can be subjective because it largely depends on its purpose. A for-profit company has a different type of purpose than a non-profit.

In this case, we are going to consider the question from the vantage point of a company with shareholders.

If you’re a shareholder, your interests are to maximize your return relative to your investment.

The most fundamental way to assess the quality of a business is its cash flow.

A company needs to earn more than it spends and have assets above its liabilities.

There are several metrics and methods of assessing profitability, which we’ll cover below.

How to Determine the Quality of a Company with Financial, Operating, Investing, and Business Metrics

1) Return on assets (ROA)

ROA is a measure of how much profit a company generates from its assets.

It is calculated by dividing net income by total assets.

The higher the ROA, the more efficient a company is in using its assets to generate profit.

2) Return on equity (ROE)

ROE is a measure of how much profit a company generates with the money that shareholders have invested.

It is calculated by dividing net income by total equity.

The higher the ROE, the more efficient a company is in using shareholder capital to generate profit.

3) Profit margin

Profit margin is a measure of how much of every dollar of revenue a company keeps as profit.

It is calculated by dividing net income by total revenue.

The higher the profit margin, the more efficient a company is in generating profit from its sales.

4) Asset turnover ratio

Asset turnover ratio is a measure of how much revenue a company generates per dollar of assets.

It is calculated by dividing total revenue by total assets.

The higher the asset turnover ratio, the more efficient a company is in using its assets to generate revenue.

5) Free cash flow (FCF)

Free cash flow is the cash that a company has available after it has paid for all of its expenses.

It is calculated by subtracting operating expenses from operating income.

The higher the free cash flow, the more money a company has available to reinvest in its business or pay out to shareholders.

6) Net income

Net income is the profit that a company generates after all expenses have been paid.

It is calculated by subtracting total expenses from total revenue.

The higher the net income, the more profit a company has available to reinvest in its business or pay out to shareholders.

7) Earnings per share (EPS)

Earnings per share is a measure of how much profit a company generates for each share of stock that is outstanding.

It is calculated by dividing net income by the number of shares of stock that are outstanding.

The higher the EPS, the more profit a company generates for each share of stock that is outstanding.

8) Price-to-earnings ratio (P/E)

The price-to-earnings ratio is a measure of how much investors are willing to pay for each dollar of a company’s earnings.

It is calculated by dividing the stock price by the EPS.

The higher the P/E ratio, the more investors are willing to pay for each dollar of a company’s earnings.

9) Operating cash flow (OCF)

Operating cash flow is the cash that a company generates from its operations.

It is calculated by adding operating income to non-operating income and then subtracting out taxes.

The higher the OCF, the more cash a company has available to reinvest in its business or pay out to shareholders.

10) Financial leverage ratio

The financial leverage ratio is a measure of how much debt a company has relative to its equity.

It is calculated by dividing total liabilities by total equity.

The higher the financial leverage ratio, the more debt a company has relative to its equity. This can be seen as a riskier investment because if something goes wrong, the investors may not get their money back.

11) Dividend yield

The dividend yield is a measure of how much a company pays out in dividends relative to its stock price.

It is calculated by dividing the annual dividend per share by the stock price per share.

The higher the dividend yield, the more income a company pays out to shareholders relative to its stock price. This can be seen as a more secure investment because the company is sharing its profits with the shareholders.

However, what matters most is dividend sustainability, not the dividend yield itself.

Earnings and cash flow is most important.

11) Gross margin

Gross margin is a measure of how much profit a company generates from its sales.

It is calculated by subtracting the cost of goods sold from total revenue.

The higher the gross margin, the more profit a company generates from its sales.

12) Debt-to-equity ratio (D/E)

The debt-to-equity ratio is a measure of how much debt a company has relative to its equity.

It is calculated by dividing total liabilities by total shareholders’ equity.

The higher the debt-to-equity ratio, the more debt a company has relative to its equity. This can be seen as a riskier investment because if something goes wrong, the investors may not get their money back.

13) Current ratio

The current ratio is a measure of a company’s ability to pay its short-term liabilities with its current assets.

It is calculated by dividing current assets by current liabilities.

The higher the current ratio, the more able a company is to pay its short-term liabilities with its current assets.

This is seen as a good thing because it shows that the company has the resources to meet its obligations.

14) Quick ratio

The quick ratio is a measure of a company’s ability to pay its short-term liabilities with its liquid assets.

Liquid assets are cash and other assets that can be quickly converted to cash.

It is calculated by dividing liquid assets by current liabilities.

The higher the quick ratio, the more able a company is to pay its short-term liabilities with its liquid assets. This is seen as a good thing because it shows that the company has the resources to meet its obligations.

15) Inventory turnover ratio

The inventory turnover ratio is a measure of how quickly a company sells its inventory.

It is calculated by dividing cost of goods sold by average inventory.

The higher the inventory turnover ratio, the quicker a company sells its inventory. This is seen as a good thing because it shows that the company’s products are in demand and are selling well.

16) Days sales outstanding (DSO)

Days sales outstanding (DSO) is a measure of how long it takes a company to collect payment after a sale is made.

It is calculated by dividing accounts receivable by sales per day.

The lower the days sales outstanding, the quicker a company collects payment after a sale is made. This is seen as a good thing because it shows that the company is efficient at collecting payments.

17) Price-to-book (P/B) ratio

The P/B ratio is calculated by dividing the market value of a company’s shares (share price) by the book value of its equity.

The market value of equity is the total value of a company’s outstanding shares, which is determined by multiplying the share price by the number of shares outstanding.

The book value of equity is calculated by subtracting a company’s total liabilities from its total assets.

The P/B ratio is used to compare a company’s market value to its book value and is often expressed as a multiple. For example, if a company has a market value of $100 million and its book value is $50 million, then its P/B ratio would be 2 ($100 million/$50 million).

A high P/B ratio could mean that a stock is overvalued. Conversely, a low P/B ratio could indicate that a stock is undervalued.

However, like all metrics on this list, the P/B ratio is just one metric and should be considered in conjunction with other ratios and fundamental analysis before making an investment decision.

18) Enterprise value (EV)

Enterprise value is a measure of a company’s worth, taking into account both its equity and its debt.

It is calculated by adding market capitalization to total debt and then subtracting cash and investments.

The higher the enterprise value, the more a company is worth.

The EV of a company isn’t important on its own, but it will help you assess various valuation metrics, such as:

• EV/EBITDA
• EV/EBIT
• EV/FCF

19) Price-to-sales (P/S) ratio

The price-to-sales ratio is a measure of how much a company’s stock price is relative to its sales per share.

It is calculated by dividing the stock price per share by the sales per share.

The higher the price-to-sales ratio, the more expensive a company’s stock is relative to its sales. This can be seen as a riskier investment because there is less room for sales growth.

20) Economic value added (EVA)

Economic value added is a measure of how much value a company creates for its shareholders.

It is calculated by subtracting the cost of capital from operating profit.

The higher the economic value added, the more value a company creates for its shareholders. This is seen as a good thing because it shows that the company is efficient at using its capital to generate profits.

23) Cash flow return on investment (CFROI)

Cash flow return on investment is a measure of how much cash flow a company generates relative to its investment.

It is calculated by dividing cash flow from operations by the net book value of assets.

The higher the cash flow return on investment, the more cash flow a company generates relative to its investment. This is seen as a good thing because it shows that the company is efficient at using its assets to generate cash flow.

24) Dupont Model of ROE Components (Net Margin, Asset Turnover, Equity Multiplier)

The Dupont Model of ROE Components is a way to decompose the return on equity into its three main components: net margin, asset turnover, and its equity multiplier.

It is calculated by multiplying net margin by asset turnover and then multiplying that result by the equity multiplier.

The Dupont Model of ROE Components can be used to help identify which component is driving a company’s overall return on equity. This can be helpful in determining where to focus improvement efforts.

25) Earnings before interest, taxes, depreciation, and amortization (EBITDA)

Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a measure of a company’s profitability that excludes non-operating items such as interest expense, taxes, depreciation, and amortization.

It is calculated by adding interest expense, taxes, depreciation, and amortization back to net income.

EBITDA is a popular measure of profitability because it excludes items that can be influenced by accounting choices. This makes it a more apples-to-apples comparison between companies.

26) Altman Z-Score

The Altman Z-Score is a measure of a company’s financial health. It is used to predict the probability of bankruptcy.

It is calculated by adding up five ratios: working capital / total assets, retained earnings / total assets, earnings before interest and taxes / total assets, market value of equity / book value of debt, and sales / total assets.

Companies with a score above 3.0 are considered to be financially healthy and have a low risk of bankruptcy. Companies with a score below 1.8 are considered to be at high risk of bankruptcy.

27) Gearing ratio

The gearing ratio is a measure of a company’s financial leverage.

It is calculated by dividing total debt by total assets.

The higher the gearing ratio, the more debt a company has relative to its assets. This can be seen as a riskier investment because a company with a high gearing ratio is more likely to default on its debt if there is an economic downturn.

The term “gearing ratio” is more common in the UK than the US, which is most likely to use “debt-to-equity ratio” or “financial leverage ratio”.

28) Piotroski F-Score

The Piotroski F-Score is a measure of a company’s financial health. It is used to predict the probability of bankruptcy.

It is a combination of ratios related to profitability, leverage, liquidity, and operating efficiency.

It is calculated by adding up nine ratios assigned binary 0 or 1 outcomes based on their trend or yes/no results:

• return on assets
• change in ROA
• operating cash flow
• accruals (cash flow from operations / total assets relative to ROA)
• debt / equity
• number of shares
• gross margin
• asset turnover ratio
• current ratio

Companies with a score above 7 are considered to be financially healthy and have a low risk of bankruptcy.

Companies with a score below 2 are considered to be at high risk of bankruptcy.

29) Montier’s C-Score

Montier’s C-Score is a measure of accounting accuracy, running on a scale from 0-6, with a higher number suggestive of accounting malpractice or “cooking the books”.

1. Growing divergence between net income and cash flow (1 point). The implication is that a higher level of accruals is associated with a higher chance of profit manipulation.
2. Increasing receivable days (1 point). A large increase in receivable days might suggest accelerated revenue recognition as a way inflate profits.
3. Increasing inventory days (1 point). Increasing inventory days might suggest that input costs are being artificially reduced or that sales growth is slowing.
4. Increasing other current assets (1 point). Companies might be aware that investors often look at receivables and inventory, and might disguise problems in current assets.
5. Declines in depreciation relative to gross fixed assets (1 point). Firms have been known to lower depreciation as a way to artificially inflate profits.
6. Total asset growth in excess of 10% (1 point). Some companies become serial acquirers and use acquisitions to manipulate earnings.

30) Beneish M-Score

The Beneish M-Score is a measure of accounting accuracy, with a higher number suggestive of aggressive accounting.

A score greater than -1.78 may suggest that the company is likely to be manipulating its financial statements, while a negative score suggests that the company is not manipulating its financial statements.

Now that we’ve covered some of the most important financial metrics for assessing the quality of a business, let’s take a look at some other factors that can impact a company’s profitability and success.

FINANCIAL RATIOS: How to Analyze Financial Statements

Factors Behind a Company’s Success

1) Competitive advantage

A competitive advantage is something that gives a company an edge over its competitors.

For example, it can be a cost advantage, a type of differentiation advantage, or a technological advantage.

2) Sustainable competitive advantage

A sustainable competitive advantage is an advantage that is not easily replicated by competitors and thus can be maintained over the long term.

Some things are easier to copy than others.

3) Economies of scale

Economies of scale refer to the cost savings that a company can achieve by increasing its production.

These cost savings can be passed on to consumers in the form of lower prices, or they can be used to increase profits.

4) Economies of scope

Economies of scope refer to the cost savings that a company can achieve by producing multiple products. These cost savings can be used to lower prices or to increase profits.

5) Brand equity

Brand equity is the value of a brand. It is the difference between the price a customer is willing to pay for a product with the brand and the price they would pay for the same product without the brand.

A strong brand can give a company a competitive advantage and help to increase profits.

6) Switching costs

Switching costs are the costs that a customer incurs when they switch from one product to another.

These costs can include financial costs, such as early termination fees, or time/emotional costs, such as the hassle of learning how to use a new product.

High switching costs can create a barrier to entry for competitors and help to increase profits.

7) Network effects

Network effects occur when the value of a product or service increases as more people use it.

Examples of products with network effects include social media platforms, such as Facebook and Twitter, and operating systems, such as Windows and iOS.

Network effects can create a barrier to entry for competitors and help to increase profits.

For example, Apple’s business was heavily built on the iPhone. Even though a smartphone is easy to copy and there are lots of companies producing them, it is hard to replicate Apple’s network effects.

8) Path dependence

Path dependence occurs when the future of a product or technology is determined by its past. In other words, the path that a product or technology takes is not always the most efficient or logical one; instead, it is often determined by historical accidents.

For example, QWERTY keyboards are used today because they were used in the early days of typewriters. Even though there are arguably more efficient keyboard layouts, such as Dvorak, QWERTY has become the standard because it is the path that typewriters took.

9) Positive feedback loops

A positive feedback loop is a situation in which the more of a product or service that is used, the more valuable it becomes.

Examples of products with positive feedback loops include social media platforms, such as Facebook and Twitter, and search engines, such as Google.

Positive feedback loops can create a barrier to entry for competitors and help to increase profits.

10) Critical mass

Critical mass is the point at which a product or service becomes widely used and accepted.

For example, Microsoft Office became widely used when it reached critical mass in the early 1990s. Once it reached critical mass, it became very difficult for competing products, such as WordPerfect, to gain market share.

Critical mass can create a barrier to entry for competitors and help to increase profits.

Types of Ratios to Analyze

• Leverage ratios
• Liquidity ratios
• Efficiency ratios
• Profitability ratios
• Coverage ratios

Leverage ratios

Leverage ratios are used to measure a company’s debt. They are used to assess the riskiness of a company’s financial position and to evaluate its ability to meet its financial obligations.

There are various types of leverage ratios:

1) Debt-to-assets ratio

2) Debt-to-equity ratio

3) Interest coverage ratio

4) Debt-to-EBITDA ratio

Debt-to-assets ratio

The debt-to-assets ratio is a measure of a company’s financial leverage. It is calculated by dividing a company’s total debt by its total assets.

A high debt-to-assets ratio indicates that a company is heavily leveraged and may be at risk of defaulting on its debt obligations.

A low debt-to-assets ratio indicates that a company has a strong financial position and is less likely to default on its debt obligations.

Debt-to-equity ratio

The debt-to-equity ratio is a measure of a company’s financial leverage. It is calculated by dividing a company’s total debt by its shareholder equity.

A high debt-to-equity ratio indicates that a company is heavily leveraged and may be at risk of defaulting on its debt obligations.

A low debt-to-equity ratio indicates that a company has a strong financial position and is less likely to default on its debt obligations.

Interest coverage ratio

The interest coverage ratio is a measure of a company’s ability to make its interest payments. It is calculated by dividing a company’s EBITDA by its interest expenses.

A high interest coverage ratio indicates that a company can easily make its interest payments.

A low interest coverage ratio indicates that a company may have difficulty making its interest payments.

Debt-to-EBITDA ratio

The debt-to-EBITDA ratio is a measure of a company’s financial leverage. It is calculated by dividing a company’s total debt by its EBITDA.

A high debt-to-EBITDA ratio indicates that a company is heavily leveraged and may be at risk of defaulting on its debt obligations.

A low debt-to-EBITDA ratio indicates that a company has a strong financial position and is less likely to default on its debt obligations.

Liquidity ratios

Liquidity ratios are used to measure a company’s ability to meet its short-term obligations. They are used to assess the riskiness of a company’s financial position and to evaluate its solvency.

There are various types of liquidity ratios:

1) Current ratio

2) Quick ratio

3) Cash ratio

Efficiency ratios

Efficiency ratios are used to measure a company’s use of its resources. They are used to assess the efficiency of a company’s operations and to evaluate its financial health.

There are various types of efficiency ratios:

1) Accounts receivable turnover ratio

2) Inventory turnover ratio

3) Accounts payable turnover ratio

4) Days sales outstanding (DSO)

5) Working capital turnover ratio

6) Fixed asset turnover ratio

7) Total asset turnover ratio

8) Return on assets (ROA)

9) Return on equity (ROE)

Profitability ratios

Profitability ratios are used to measure a company’s ability to generate profits. They are used to assess the financial health of a company and to evaluate its performance.

There are various types of profitability ratios:

1) Gross margin ratio

2) Operating margin ratio

3) Net margin ratio

4) Return on assets (ROA)

5) Return on equity (ROE)

6) Earnings per share (EPS)

7) Price-earnings (P/E) ratio

Coverage ratios

Coverage ratios are used to measure a company’s ability to make its debt payments. They are used to assess the financial health of a company and to evaluate its solvency.

There are various types of coverage ratios:

1) Interest coverage ratio

2) Debt-to-EBITDA ratio

3) Debt service coverage ratio (DSCR)

4) Fixed charge coverage ratio

Types of Analysis

• Financial ratio analysis
• Comparative analysis
• Fundamental analysis
• Discounted cash flow analysis

Financial ratio analysis

Financial ratio analysis is a type of comparative financial analysis that is used to assess the relative financial health of two or more companies.

Financial ratios are mathematical relationships between different financial statement items. They are used to measure various aspects of a company’s financial position, performance, and solvency.

Sometimes financial ratios are pro forma in nature, which means they are projected. P/E ratios based on forward earnings are an example.

Comparative analysis

Comparative analysis is a type of financial analysis that is used to compare two or more companies.

Comparative analysis can be used to assess the relative financial health of two or more companies. It can also be used to evaluate the relative performance of two or more companies.

Fundamental analysis

Fundamental analysis is a type of financial analysis that is used to assess a company’s intrinsic value.

Fundamental analysis is based on the idea that a company’s share price will eventually reflect its true value.

Discounted cash flow analysis

Discounted cash flow analysis is a type of financial analysis that is used to assess a company’s intrinsic value.

Discounted cash flow analysis is based on the idea that a company’s share price will eventually reflect the present value of its future cash flows.

Valuation Metrics

Valuation metrics are financial ratios that are used to assess the value of a company.

Valuation metrics can be used to assess the relative value of two or more companies. They can also be used to estimate the intrinsic value of a company.

There are various types of valuation metrics:

1) Price-to-earnings (P/E) ratio

2) Enterprise value-to-EBITDA (EV/EBITDA) ratio

3) Price-to-sales (P/S) ratio

4) Price-to-book (P/B) ratio

5) Enterprise value-to-revenue (EV/R) ratio

6) Free cash flow yield

7) Net present value (NPV) via DCF

8) Internal rate of return (IRR) (common in private equity)

9) Market capitalization-to-GDP (MCAP/GDP) ratio (for a more macro perspective, sometimes also called the “Buffett indicator”)

Why ESG Matters When Evaluating Company Quality

Environmental, social, and governance (ESG) factors are increasingly being used by investors to evaluate company quality.

In the past, financial performance was the primary metric by which companies were judged, but ESG criteria are now being used to supplement traditional financial measures.

Reasons for the shift to ESG

There are a number of reasons for this shift.

First, ESG may simply help capture more information about a company.

For example, if a company is producing a product that causes pollution or the company itself is polluting, this is a risk that is likely not captured by its financial statements but may become a material risk in the future.

Second, investors are becoming more aware of the risks associated with environmental and social issues, such as climate change and human rights abuses.

And third, the rise of socially responsible investing (SRI) has led investors to seek out companies that better align with their values.

What is ESG?

ESG stands for environmental, social, and governance. It is a set of criteria used to evaluate a company’s impact on society and the environment. ESG factors can be divided into three broad categories:

Environmental factors

These include a company’s emissions levels, its energy use, its water consumption, and its waste generation.

Social factors

These include a company’s treatment of employees, its relationships with suppliers, and its impact on communities.

Governance factors

These include a company’s board structure, executive compensation practices, and shareholder rights.

Why is ESG Important?

There are a number of reasons why ESG is important for investors to consider.

First, companies with strong ESG ratings may outperform their peers over the long term. This could be due in part to the fact that companies with strong ESG ratings tend to be better managed and have lower costs of capital.

Second, investors are becoming more aware of the risks associated with environmental and social issues such as climate change and human rights abuses. As these risks become more visible, investors are increasingly incorporating them into their investment decision-making process.

Finally, the rise of socially responsible investing (SRI) has led investors to seek out companies that align with their values.

This focus also shifts market pricing, so it’s important for all traders and investors to understand even if opinions differ wildly on ESG’s merits.

As more and more capital flows into SRI investments, the pressure on companies to improve their ESG ratings will only increase. After all, it can lead to better valuations and better results for shareholders and potentially not just in the short-term.

Key Takeaways – Financial, Operating, Investing, and Business Metrics

• Efficiency ratios are used to measure a company’s use of its resources.
• Profitability ratios are used to measure a company’s ability to generate profits.
• Coverage ratios are used to measure a company’s ability to make its debt payments.
• Financial ratio analysis is a type of comparative financial analysis that is used to assess the relative financial health of two or more companies.
• Comparative analysis is a type of financial analysis that is used to compare two or more companies.
• Fundamental analysis is a type of financial analysis that is used to assess a company’s intrinsic value.
• Discounted cash flow analysis is a type of financial analysis that is used to assess a company’s intrinsic value.
• Valuation metrics are financial ratios that are used to assess the value of a company.
• ESG will play a larger role in trading, investing, and overall company valuation going forward.

FAQs – Financial, Operating, Investing, and Business Metrics

What is a business metric?

A business metric is a quantifiable measure that is used to track and assess the performance of a company.

Business metrics can be financial, such as revenue or profit margins, or they can be non-financial, such as customer satisfaction levels or employee retention rates.

By tracking key business metrics, companies can identify areas where they are performing well and areas where there is room for improvement.

There are a variety of different business metrics that companies can track, and the specific metrics that are tracked will vary depending on the industry and the goals of the company.

However, some common business metrics include:

• Revenue
• Profit margin
• Customer satisfaction level
• Employee retention rate
• Sales growth rate
• Market share
• Production costs

Is market capitalization a measure of company quality?

Market capitalization is a measure of the value of a company.

It is calculated by multiplying the stock price by the number of shares of stock that are outstanding.

The higher the market capitalization, the more valuable a company is.

Market capitalization is not a direct measure of company quality.

What is the difference between market capitalization and enterprise value?

Market capitalization is a measure of the value of a company’s equity value.

Enterprise value is a measure of the value of a company as a whole.

Enterprise value includes both the market capitalization of the company’s stock and the debt and cash that the company has on its balance sheet.

The higher the enterprise value, the more valuable a company is.

What are some other measures of company quality?

Some other measures of company quality include profitability ratios, coverage ratios, and efficiency ratios.

Profitability ratios measure a company’s ability to generate profits.

Coverage ratios measure a company’s ability to make its debt payments.

Efficiency ratios measure a company’s ability to use its assets and liabilities efficiently.

What is the difference between a balance sheet and an income statement?

A balance sheet is a financial statement that shows a company’s assets, liabilities, and equity at a specific point in time.

An income statement is a financial statement that shows a company’s revenue, expenses, and net income over a period of time.

The balance sheet provides information about a company’s financial position, while the income statement provides information about a company’s financial performance.

What’s the most important financial statement?

The cash flow statement is the most important financial statement.

The cash flow statement shows a company’s inflows and outflows of cash over a period of time.

The CF statement can be built from an income statement and balance sheet.

It is used to assess a company’s liquidity, solvency, and financial health.

What is the difference between a balance sheet and a cash flow statement?

A balance sheet is a financial statement that shows a company’s assets, liabilities, and equity at a specific point in time.

A cash flow statement is a financial statement that shows a company’s inflows and outflows of cash over a period of time.

The balance sheet provides information about a company’s financial position, while the cash flow statement provides information about a company’s liquidity, solvency, and financial health.

What’s the most important thing to look for in a cash flow statement?

The most important thing to look for in a cash flow statement is the company’s operating cash flow.

Operating cash flow is the cash that a company generates from its normal business activities.

It is used to assess a company’s ability to generate profits and pay its debts.

Why is ESG important in trading and investing?

ESG is quickly becoming one of the most important criteria used by investors to evaluate company quality.

This shift is being driven by a number of factors, including the performance of companies with strong ESG ratings, the increasing awareness of environmental and social risks, and the rise of socially responsible investing (SRI).

As more capital flows into SRI investments, the pressure on companies to improve their ESG ratings will only increase.

For these reasons, it is important for all investors to understand what ESG is and why it matters for the market as a whole and not just specific causes.

What are accounting KPIs?

Accounting KPIs (key performance indicators) are a set of financial and non-financial metrics used to assess the performance of an organization’s accounting function.

The specific KPIs tracked will vary depending on the goals of the organization, but some common accounting KPIs include:

• Accounts receivable turnover
• Days sales outstanding
• Inventory turnover
• Asset turnover
• Return on assets
• Gross margin percentage
• Operating expense ratio
• Accounts payable turnover
• Interest coverage ratio
• Cash conversion cycle

What is a balanced scorecard?

The balanced scorecard is a performance management tool that helps organizations to track and assess their progress toward achieving their strategic goals.

The balanced scorecard includes a variety of different metrics, both financial and non-financial, which are grouped into four key perspectives:

• Financial perspective
• Customer perspective
• Internal business process perspective
• Learning and growth perspective

By tracking progress across all four perspectives, organizations can get a well-rounded view of their performance and identify areas where they need to improve.

What is the difference between metrics and measurements? (Metrics vs. measurements)

The main difference between metrics and measurements is that metrics are used to track and assess performance, while measurements are simply a way of collecting data.

Metrics are usually more high-level than measurements, and they often include a mix of financial and non-financial indicators.

Measurements, on the other hand, are typically more specific and detailed. They can be financial or non-financial, but they are usually just one particular type of data point.

For example, measuring the number of new customers acquired in a month is a measurement, while tracking customer acquisition costs as a percentage of revenue is a metric.

Both metrics and measurements are important for businesses, but metrics are typically more useful for decision-making purposes, as they provide a broader overview of performance.

Final Word – Financial, Operating, Investing, and Business Metrics

There is no one perfect measure of company quality. There are various financial, operating, investing, and business metrics to understand this.

Different investors will focus on different measures, depending on their investment goals.

However, some commonly used measures of company quality include profitability ratios, coverage ratios, and efficiency ratios, as well as valuation metrics.

The most important thing to look for in a cash flow statement is the company’s operating cash flow.

This will give you an idea of the company’s ability to generate profits and pay its debts.