Financial Performance Indicators Definition

There are a number of different ways to measure financial performance, but some indicators are more commonly used than others. Here is a brief definition of four popular financial performance indicators:

1. Revenue: This is the total amount of money that a company brings in from its various activities. It is typically expressed as sales minus returns, discounts, and allowances.

2. Gross profit: This is the difference between revenue and the cost of goods sold. It provides a measure of how much profit a company makes from its core operations after accounting for the cost of the goods it sells.

3. Operating income: This is a company’s gross profit minus its operating expenses. It provides a measure of how much profit a company makes from its core operations after accounting for all of its costs, including both direct and indirect costs.

4. Net income: This is a company’s operating income minus its taxes and interest expenses. It provides a measure of how much profit a company makes after accounting for all of its costs, including taxes and interest expenses.