Financial performance indicators, also known as key performance indicators (KPIs), are quantifiable measurements used to determine, track, and project the economic well-being of a business.


KPIs are important to business objectives because they keep objectives at the forefront of decision making. It’s essential that business objectives are well communicated across an organization, so when people know and are responsible for their own KPIs, it ensures that the business’s overarching goals are top of mind.

Frequently Asked Questions

What is a financial indicator?

Financial indicators are statistics extensively used to monitor the soundness, stability and performance of various sectors of the economy.

What are performance indicators?

A performance indicator or key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it engages.

What are the 4 types of performance indicators?

  • Customer Satisfaction,
  • Internal Process Quality,
  • Employee Satisfaction, and.
  • Financial Performance Index.

What is the most important financial KPI?

  • Sales Growth Rate. Performance Indicators.
  • Revenue Concentration. Performance Indicators.
  • Net Profit Margin. Performance Indicators.
  • Accounts Receivable Turnover. Performance Indicators.
  • Working Capital.

How is financial performance measured?

Evaluating financial performance is performed by measuring and analyzing the following areas of a business: Cash flow – measuring with the cash flow statement. Income and expenditure – measuring with the income statement. Assets, liabilities and equity – measuring with the balance sheet.

What is the best measure of financial performance?

A good metric for evaluating profitability is net margin, the ratio of net profits to total revenues.

What are the three important performance indicators?

These types of indicators include: employee engagement, satisfaction and turnover.

What is key performance indicators examples?

An example of a key performance indicator is, “targeted new customers per month”. Metrics measure the success of everyday business activities that support your KPIs. While they impact your outcomes, they’re not the most critical measures. Some examples include “monthly store visits” or “white paper downloads”.

How do you create a financial KPI?

The formula for this KPI is Net Income ÷ Total Assets. The Book Value Ratio KPI looks at the value per share of a business. The equation for this KPI is Shareholder’s Equity ÷ Total Number of Shares Outstanding.

Why are financial indicators important?

By understanding these metrics, you can be better positioned to know how the business is performing from a financial perspective. You can then use this knowledge to adjust the goals of your department or team and contribute to critical strategic objectives.

What are business performance indicators?

Organizations use KPIs to evaluate success at reaching targets. High-level KPIs may focus on the overall performance of the business, while low-level KPIs may focus on processes across departments like sales, marketing, HR, or support.

What is financial performance PDF?

Financial performance is the achievement of the company’s financial performance for a certain period covering the collection and allocation of finance measured by capital adequacy, liquidity, solvency, efficiency, leverage and profitability.

Which of the following is not a financial indicator?

Trial Balance is not a financial statement. Trial Balance is a list of closing balances of ledger accounts on a certain date and is the first step towards the preparation of financial statements.

How do you compare financial performance between two companies?

The price-to-earnings ratio compares a company’s share price to its earnings per share. Net profit margin compares net income to revenues. It’s useful to compare various ratios of different companies over time for a reliable view of current and potential future financial performance.

How do banks measure financial performance?

The most common measure of bank performance is profitability. Profitability is measured using the following criteria: Return on Assets (ROA) = net profit/total assets shows the ability of management to acquire deposits at a reasonable cost and invest them in profitable investments (Ahmed, 2009).