20 Business Performance Metrics Terms
Various metrics can be used to measure the success of a business. These metrics help companies to track their progress, identify areas for improvement, and make informed decisions for future growth. In this article, we’ll introduce you to twenty standard business performance metrics terms to help you better understand your business’s overall performance.
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- Gross Profit Margin – A profitability ratio that measures how much of each dollar in sales is left after deducting the cost of goods sold.
- Net Profit Margin – Another profitability ratio that measures what percentage of revenue remains as profit after all expenses have been paid.
- Return on Assets (ROA) – This metric indicates a company’s ability to generate profits from its assets.
- Return on Equity (ROE) – ROE measures a company’s profitability by showing how much profit it generates with the money shareholders have invested.
- Debt-to-Equity Ratio – A measure of a company’s financial leverage, calculated by dividing its total liabilities by shareholder equity.
- Current Ratio – This liquidity ratio compares a company’s current assets to its current liabilities, reflecting its ability to pay short-term obligations.
- Quick Ratio – A more conservative liquidity ratio that measures a company’s ability to meet its short-term obligations with only quick assets.
- Inventory Turnover is a metric that shows how many times a company’s inventory is sold and replaced over a specific period of time.
- Days Sales Outstanding (DSO) – Also known as accounts receivable turnover, this metric measures how quickly a company collects customer payments.
- Days Payable Outstanding (DPO) – This metric indicates how long it takes a company to pay its suppliers for goods or services received.
- Cash Conversion Cycle (CCC) – A measure of the time it takes for a company to convert its raw materials into cash received from sales.
- Sales Growth measures the increase or decrease in a company’s sales over a specific period of time.
- Gross Margin – A measure of how much profit a company makes on each dollar of revenue after deducting the cost of goods sold.
- Operating Margin – This profitability ratio shows how much profit a company generates from its operations, excluding taxes and interest.
- Return on Investment (ROI) measures the return or profit generated from an investment relative to its cost.
- Earnings Per Share (EPS) – A measure of a company’s net income divided by the number of outstanding shares, indicating how much profit is attributable to each share.
- Price-to-Earnings (P/E) Ratio – A valuation ratio that calculates a company’s current stock price by its earnings per share.
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- Dividend Yield – This metric measures the percentage return on investment from dividends paid out by a company.
- Customer Acquisition Cost (CAC) – The average cost of acquiring a new customer, including sales and marketing expenses.
- Churn Rate – A measure of how many customers or subscribers stop using a company’s product or service over a specific period, indicating customer retention and satisfaction.
In conclusion, understanding business performance metrics is crucial for any company to achieve success. By utilizing these terms effectively, companies can identify areas of improvement, track progress, and measure their overall financial health.
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