7 indicators for the performance of your business

6 avril 2022

Financial indicators are financial data used to manage your business, to assess its financial health, its capacity for development and to detect malfunctions in time.

But what are these financial indicators or ratios, and how to calculate them?

We offer you a list of 7 financial performance and profitability indicators to monitor closely.

List and calculation of financial indicators

There are many financial indicators, but here are 7 that you absolutely need to watch.

1-The working capital requirement (WCR)

The working capital requirement is the calculation of the money necessary for the company to:

1.     -Mitigate any short-term cash flow problems;
2.     -Expenditure pending receipt.

▷ Calculation of WCR = (average stock + trade receivables) - debts

2-Overall net working capital (FRNG)

Overall net working capital is the safety cash reserve to meet the working capital requirement.

This is the excess money after financing:

1.     -Stable jobs (fixed assets),
2.     -Investments through stable resources (permanent capital and long-term financial debt).

▷ Calculation of the FRNG = stable resources - stable jobs

3-Net cash (TN)

Net cash is the money that can be mobilized at a given time, i.e. cash on hand. It reflects short-term financial balance. It is therefore the difference between bank cash and bank debt. But it can also be calculated using the 2 previous indicators:

▷ Calculation of TN = FRNG - BFR

4-Break-even point (SR)

The break-even point is the turnover to be generated for the company to cover all of its costs, fixed and variable, and to become profitable. It makes it possible to estimate the viability of the The CAF can contribute to investments or to working capital, for example. company and to reassure investors.

▷ Calculation of SR = fixed charges/((CA - variable charges)/CA)

5-The commercial margin

Trade margin is the profit generated by business ventures, i.e. the difference between the selling price and the buying price of goods or services. It makes it possible to estimate profits but also to guide the commercial strategy, in particular the definition of prices.

▷ Calculation of the overall commercial margin = turnover excluding tax - purchases excluding tax

6-Gross operating surplus (EBITDA)

The gross operating surplus corresponds to:

1.     -The operating resource generated by the main activity of the company,
2.     -After payment of social contributions,
3.     -Before depreciation charges.

EBITDA is therefore the economic result of the company, excluding depreciation, financial management and exceptional operations.

▷ Calculation of EBITDA = gross margin + operating subsidies - taxes - duties - payroll costs

It also allows you to calculate:

1.     -Return on capital (EBITDA/invested capital),
2.     -Cost control (EBITDA/CA).

7-Self-financing capacity (CAF)

Self-financing capacity is the monetary surplus generated by the activity of a company.

It is the sum of net profit and “non-cash expenses” including:

1.     -Depreciation allowances,
2.     -Provisions for risks and charges.

The above calculation is made from the income statement or the gross operating surplus.

▷ Calculation of CAF = EBITDA + cashable income - cashable expenses