Understanding key financial metrics is essential for making informed business decisions. Here are five critical metrics every business owner should track:
- Revenue Growth
Measures how a company’s sales increase over time. Consistent growth indicates a strong business model. - Net Profit Margin
This metric shows how much profit a company makes after all expenses. A higher margin means better profitability. - Return on Investment (ROI)
Indicates how effectively a company uses investments to generate profits. The higher the ROI, the better the returns. - Current Ratio
A liquidity ratio that assesses a company’s ability to pay short-term liabilities. A ratio above 1.5 is generally considered healthy. - Debt-to-Equity Ratio
Shows the proportion of debt a company uses to finance its operations compared to its equity. A lower ratio means lower financial risk.
Tracking these metrics helps business owners identify strengths, weaknesses, and areas for improvement in financial performance.
