Financial KPI

Financial KPIs show how well a business is performing in money terms. They draw on figures from the income statement, balance sheet and cash flow statement.

Common financial KPIs include revenue growth, gross margin, operating margin, net profit, earnings per share, free cash flow, return on equity, debt levels and the number of days customers take to pay. Each answers a different question, such as whether the business is growing, whether it is profitable and whether it can pay its bills.

For example, a company might set targets of 8% annual revenue growth, an operating margin of at least 15% and free cash flow of at least 10 million a year.

Financial KPIs are essential, but they tend to be lagging indicators: they show the results of past decisions. They are often paired with operating KPIs, such as customer satisfaction or production efficiency, which can give earlier warnings of how financial results are likely to develop.