Top 8 Business Metrics All Entrepreneurs Should Know

Top 8 Business Metrics All Entrepreneurs Should Know Year-Over-Year Growth Rate The Year-Over-Year Growth Rate is used to measure performance. It compares a time period against the same time period trom the previous year. Subtract last year's number from this year's number for the total difference for the year. A positive number indicates growth. A negative number indicates loss, Divide the difference by last year s number. That number is your growth rate. Gross Profit The Gross Profit is your remaining profit after selling product or service and deducting the cost associated with its production and sale. a Gross Profit = Cost of Goods Sold - Revenue ..w. Gross Profit Margin 3. The Gross Profit Margin measures a business s financial healthy by determining the proportion of that is left over from revenues after money accounting for the costs of goods sold. Gross Profit Margin = Gross Profit Sales Gross Profit Margin 4 The Operating Income is the profit earned from a business s normal business operations. The value does not include profits earned from investments, or the effects of interest and taxes. Operating Income Operating Revenue - Costs of Goods Sold - Operating Expenses - Depreciation & Amortization Operating Margin The Operațing Margin determines what proportion of a business s revenue is lett over after paying variable costs of product. Businesses must have a strong operating margin in order to pay for fixed costs. Operating Margin = Net Sales Operating income Benefit-Cost Ratio 6. The Benefit-Cost Ratio indicates the relationship between the amount of money made trom a product and the costs of incurred from its production. BCR = Total benefit : Total cost Simple Interest The Simple Interest is the amount paid in return tor the privilege of borrowing money. Multiply the loan amount, also called the principal, by the rate. The rate is the annual percentage you are being charged. by remaining life of the debt. Multiply the result the time to maturity, which is the Simple Interest = (Principal x Rate) x Time Compound Interest The Compound Interest is the future value of your investment. The calculation adds the accumulated interest of previous periods of a into the principal sum. deposit or loan back Compound Interest = P(1+r/n)^nt P = principal investment amount r = annual interest amount n = number of times that interest is compounded per year the t = number of years money is invested for SWIFT CAPITAL SwiftCapital.com Sources: http://useconomy.about.com/od/glossary/glyear_over_year.htm, www.lnvestopedia.com, www.entrepreneur.com, http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php 2. 00