# 5 Financial Indicators to Track the Health of Your Company

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We know that keeping track of business finances is critical to your success. In fact, with the control of the resources spent and available gives inferences about market performance, and also make better decisions.

For good financial management , the use of financial indicators is especially useful. And among them, some are considered more important to know how the business is. So in today’s post we present 5 of them, in addition to their calculations and how to use them properly. Check out!

## 1. Gross revenue

Gross billing is an indicator it is simple to track, but it serves as the basis for many other analyzes. To keep up with it, you just have to add up all the resource inflows in the company within a certain period.

Basically, just add up all the sales made or all the monthly payments paid by the customers. If a store sold in a month, 200 pieces at $ 100.00, for example, the billing is given for $ 20,000.00.

Thus, the formula is:

gross sales = number of sales x unit price

Initially, it can be compared against the expected value. If the expectation, through relevant analysis, was $ 30,000.00, then there is a probable indication that something harmful to the billing occurred with the business.

## 2. Profitability

Profitability is one of the most important financial indicators because a business can have high revenue, and not be profitable. So, as it is from the profit margin that the business holds, expands and pays its owners, it is worth keeping an eye on that indicator.

It is calculated as follows:

profitability = (gross profit / revenue) x 100%

If of the R $ 20,000.00, collected in the previous example, R $ 12,000.00 corresponds to the profit, that is to say that there is a profitability of 60%. If the ratio is given by net or operating profit, it is operating margin.

In this case, it is worth thinking that of the R $ 20,000.00, R $ 8,000.00 correspond to the operating profit. Thus, profitability or operating margin is given by 40%.

In fact, there is no unique number that indicates excellent profitability – in fact, the higher the value found, the better. A negative figure, on the other hand, indicates that the business is spending more than it earns, even with sales.

## 3. Contribution margin

The contribution margin, in turn, indicates in relative way how much each product or service contributes to the company’s profit. And, for it to be calculated, the following formula is used:

contribution margin = [(sale value – fixed and variable costs) / sale value] x 100%

For calculation purposes, let’s take into account a certain product, which costs $ 100.00. Of this amount, R $ 10 goes to the acquisition of R $ 40.00 for various taxes and R $ 10.00 for the payment of other expenses.

Thus, the contribution margin is given by:

contribution margin = [(100 – 40 – 10 – 10) / 100] x 100%

contribution margin = 40%

So, this means that in the case of this product, every R $ 1.00 invested there is a contribution of R $ 0.40 to the profits of the company.

## 4. Current Liquidity

Knowing the immobilization of business resources is also fundamental for making decisions and for understanding how your financial situation is going. After all, having too many resources depleted the business’s competitive advantage, and it makes you lose good chances.

To prevent this from happening, it is recommended to keep up with current liquidity. This indicator is short-term and shows, within a certain period of time, how immobilized the assets are.

To calculate it, we use the formula:

current assets = current assets / current liabilities

In this case, current assets correspond to all resources, such as accounts receivable, cash and investments. Current liabilities correspond to accounts payable, fixed costs and other expenses.

So if in a given month the company has current assets of R $ 50,000.00 and current liabilities of R $ 25,000.00, for example, current liquidity is 2 or 200% – which indicates that the business has many resources available .

However, in another example, if the assets correspond to R $ 50,000.00 and the liabilities to R $ 75,000.00, then the current liquidity is of 0.67 approximately. With this, the company will need to have cash resources to fulfill its obligations.

## 5. Average Ticket

The average ticket refers to customers and is especially important to understand both business performance and customer behavior. Basically, it corresponds to the average amount spent by clients within the finished period of time.

The calculation can be done either individually or collectively, as follows:

average ticket = gross sales / number of sales

Therefore, a customer who bought R $ 150 in one month, R $ 220 in the second and R $ 230 in the third month, for example, had a total cost of R $ 600.00 in the quarter. Thus, your average ticket is given for $ 200.00.

Already for the calculation of collective way, just think of a business that had gross sales of $ 200,000.00 and about 500 sales. With this, the average ticket per customer is $ 400.00.

Tracking this indicator is important because to increase business revenue, you can increase both the number of sales and the average ticket – that is, make people spend more.

And the level of this indicator will be good or bad depending on the business. If the average ticket is $ 400.00 and the products cost an average of $ 300, there is an indication that customers are making smaller purchases or are not returning. If the products cost around R $ 100, this same average ticket indicates a successful strategy.

Finally, as we have seen, the financial indicators that allow us to monitor the health of the company include gross revenue, profitability, contribution margin, current liquidity and average ticket. So with proper analysis of them, for sure, the business is favored – just like your success!

So, how have you been following the financial health of your business? Now that you understand the financial indicators better, sign up for our newsletter and receive all our content directly for free!

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