Financial metrics glossary
Financial metrics, explained with formulas and worked examples
The metrics a monthly management report is read by. Each page gives a two-sentence definition, the formula, a worked example on a sample company's books and what the number does and does not tell you.
Part of: Financial reporting for small businesses
Updated
Profit and loss
Growth, margins and the result against plan: what the month earned and why.
-
Revenue growth rate
The percentage change in revenue from one period to another.
-
Gross profit
Revenue minus the direct costs of what was sold, in dollars.
-
Gross margin
The share of revenue left after the direct costs of what you sold.
-
Contribution margin
Revenue minus variable costs: what each sale adds toward fixed costs.
-
Operating margin
Operating profit as a share of revenue, before interest and tax.
-
EBITDA
Operating profit with depreciation and amortization added back.
-
Net profit margin
Net income as a share of revenue, after every expense.
-
Budget vs actual
Each P&L line compared with its plan, in dollars and per cent.
Cash
How much cash the business generates or uses, and how long the balance lasts.
-
Operating cash flow
The cash a business's day-to-day operations bring in or use up.
-
Burn rate
How fast a company uses up its cash each month, gross and net.
-
Cash runway
How many months the cash lasts at the current net burn.
Liquidity
Whether short-term assets cover the obligations that fall due within a year.
-
Working capital
Current assets minus current liabilities, in dollars.
-
Current ratio
Current assets divided by current liabilities, as a ratio.
-
Quick ratio
Cash and receivables divided by current liabilities.
Working capital cycle
How long cash waits in receivables and stock, and how long the business holds it before paying suppliers.
-
Days sales outstanding (DSO)
The average number of days customers take to pay their invoices.
-
Days inventory outstanding (DIO)
The average number of days stock is held before it is sold.
-
Days payable outstanding (DPO)
The average number of days a company takes to pay its suppliers.
-
Cash conversion cycle (CCC)
Days from paying suppliers to collecting from customers: DSO + DIO − DPO.
-
Accounts receivable aging
Unpaid customer invoices grouped by how many days they are past due.
Computed for you, every month
The Financial Analyst reads your accounting system and delivers a monthly management report: the P&L against plan, cash with a 13-week forecast, and receivables and payables in days. Open the sample workspace to see it on a fictional company's books, with no signup.