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Utilizing key metrics for your company’s success

Cape & Plymouth Business Magazine
September 12, 2017
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As seen in the Cape & Plymouth Business Magazine

A company’s life cycle goes through various stages, including: seed/startup, growth, established, expansion, matured, and exit. No matter what the stage of the company, key financial metrics play a crucial role in a companies’ success. Owners need to understand what metrics are at the heart of their company’s operations. Those metrics may differ from owner to owner or industry to industry, and may vary depending on the growth stage of the company. The following is a list of key metrics that may are important to track, understand, and use for benchmarking:
  • Pre-tax net profit margin
  • Current ratio
  • Quick ratio
  • Working capital
  • Accounts payable days
  • Accounts receivable days
  • Inventory days
  • Cash demand period
  • Return on owner's equity (return on investment)
  • Return on assets
  • Debt to equity
Trade groups, surveys, and information providers are all potential resources for finding reliable data that can be used to benchmark your company’s metrics against industry standards. Be sure to find businesses of a similar industry, revenue size, and geographical location for your metrics. Your accounting firm should also have access to this information and be able to provide benchmark analyses as a standard service for their clients. Customized benchmarking enables companies to make informed business decisions and is a strong component of any well-rounded accounting service package.