Are you clear about what a company's financial indicators are and how they can help you increase its potential? If the answer is no, you've come to the right place!
Financial indicators or KPIs will mark the course that you should follow in the different areas of your company, since they will provide you with essential quantitative information to assess whether the objectives have been satisfactorily met or, on the contrary, whether additional strategies need to be implemented.
To assess the financial situation of a company, there are several types of useful indicators to determine its financial health in a strategic and tangible way.
On this occasion we will review:
Benefits of financial indicators;
Types of financial indicators;
What are the financial indicators of companies;
What are Sales Indicators?
Let's get started!
Benefits of financial indicators
A company's financial indicators are an x-ray of its performance and are essential for:
Calculate the profitability of the company based on generated sales, profits, break-even point, etc.;
Making strategic growth or investment decisions;
Detect the company's weaknesses to implement the necessary strategies;
Prevent potential financial crises.
In short, knowing a company's financial indicators is vital to ensuring that it remains in the market for much longer.
Types of financial indicators
The types of financial indicators that every entrepreneur should know are:
Profitability indicator
Profitability indicators are used to evaluate the economic and financial performance of a company to determine the feasibility of making an investment, taking into account the profits it generates, operating costs, shareholding, among other issues.
Liquidity indicator
The liquidity ratio is used to calculate a company's solvency level to pay a debt in a given time. To make this calculation, cash flow is taken into account, as well as fixed assets that could be exchanged for a monetary value.
In general, the liquidity ratio is useful in determining:
Solvency: It is important to take into account a company's level of solvency to ensure that it will be able to maintain and position itself in the long term;
Profitability: This reflects a company's ability to not only pay off debt, but to generate enough revenue to also generate exponential growth over the years.
Turnover: This is a key factor in determining the total amount of profits that the company generates in a given time.
Asset quality indicator
Asset quality indicators serve to obtain an overview of the company's strengths and weaknesses in relation to the real value of fixed assets compared to the expenses generated by them.
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What are the financial indicators of companies?
The indicators of the company's financial situation that cannot be missed are:
Margin is defined as the difference between the profits generated from sales and the cost of production of the products or services.
Taking into account a company's margin is useful for:
Determine competitive prices without affecting profitability;
Anticipate monetary losses before they happen;
Have a reference to evaluate the competition and the general performance of the industry in which you participate.
How to calculate a company's margin?
Gross margin refers to profits generated before taxes and is calculated as follows:
Gross margin = Gross profit / Net income