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Top 5 Finance Metrics
The most important five key performance indicators every finance leader and executive should understand and monitor to make sense of their business.
Current Ratio
Current Ratio measures the ability of your organization to pay all of their financial obligations in the short term, which is generally one year. This ratio accounts for your current assets, such as accounts receivable, and your current liabilities, such as accounts payable, to help you understand the solvency of your business.
Gross Margin
Gross Margin is a profitability ratio that measures Gross Profit as a percentage of total revenue. Typically, it is calculated as Gross Profit divided by Revenue.
Net Burn
Net Burn, often referred to as Burn Rate, is the amount a company is losing per month as they burn through their cash reserves. It occurs when a company’s operating costs are higher than their revenue. A company that is profitable and generating cash has a "negative Net Burn".
Net Profit
Net profit is the value that remains after all expenses are subtracted from the company’s total income. It is one of the best ways to determine a business' profitability and is often referred to as the bottom line.
Revenue
Revenue is defined as the income generated through a business’ primary operations. It is often referred to as “top line” and is shown at the top of an income statement.