30 Financial Metrics and KPIs to Measure Success in 2026

ByAmeliaApril 20, 202614 Mins read5

Financial key performance indicators (KPIs) are select metrics that help managers and
financial specialists analyze the business and measure progress toward strategic goals. A
wide variety of financial KPIs are used by different businesses to help monitor their
success and drive growth. For each company, it’s essential to identify KPIs that are the
most meaningful to its business.

The following overview of 30 KPIs is designed to help leaders choose the KPIs that make the
most sense for their organizations in the year ahead.

What Are KPIs?

KPIs are metrics that provide
insights into the underlying financial and operational strength of a business. They can be
based on any kind of data that is important to a company, such as sales per square foot of
retail space, click-through rate for web ads, or accounts closed per salesperson. Many KPIs
are ratios that highlight important relationships in data, such as the ratio of profit to
revenue or the ratio of current assets to current liabilities. A single KPI measurement can
provide a useful snapshot of the business’s health at a specific point in time.

KPIs are even more powerful when they are used to analyze trends over time, to measure
progress against targets, or to compare the business with other, similar companies. Their
value expands further when businesses consider them alongside other meaningful KPIs to
create a more complete view of the business.

What Is a Financial KPI?

Financial KPIs are high-level measures of profits, revenue, expenses, or other financial
outcomes that specifically focus on relationships derived from accounting data — and they’re
almost always tied to a specific financial value or ratio.

Financial KPI Categories

Most KPIs fall into five broad categories based on the type of information they measure:

Profitability KPIs, such as gross profit margin and net profit margin.
Liquidity KPIs, such as current ratio and quick ratio.
Efficiency KPIs, such as inventory turnover and accounts receivable
turnover.
Valuation KPIs, such as earnings per share and price to earnings ratio.
Leverage KPIs, such as debt to equity and return on equity.

Why Are Financial Metrics and KPIs Important to Your Business?

Like the indicators and warning lights displayed on a vehicle’s dashboard, financial KPIs
enable business leaders to focus on the big picture, helping them steer the company and
identify any pressing issues without getting mired in the details of what goes on under the
hood. These snippets of information can show when operations are running smoothly and when
there are significant changes or warning signs. KPIs can also be used to help manage the
company to achieve specific goals. In recent years, some businesses have started to add Environmental, Social, and Governance
(ESG) KPIs to address things like carbon footprint and regulatory adherence.

Which KPIs Are Best?

For any business, the best KPIs help companies determine what they’re doing well and where
they need to improve. While the actual metrics will vary from company to company, automated
KPIs are the best way to track performance. After selecting a set of KPIs that matches your
business priorities, you can generally automate their calculation and have them updated in
real time by integrating the company’s accounting and ERP systems. This ensures the KPIs
reflect the current state of the business and are always calculated in the same way.

Automating KPIs is important for companies of all sizes. It means small businesses can direct
more of their resources to analyzing KPIs instead of expending effort — and money — to
create them. Larger enterprises can also better manage voluminous data compared to
error-prone spreadsheets, and they can achieve better consistency across business units.

Defining the Right KPIs for Your Business

Determining the most useful and meaningful KPIs for your business can be challenging. The
KPIs you choose will depend on your company’s goals, business model, and specific operating
processes. Some KPIs are almost universally applicable, such as accounts receivable turnover
and the quick ratio. Other KPIs differ by industry. For example, manufacturers must
monitor the status of their inventory, while services
businesses might focus on measuring revenue per employee when evaluating
efficiency.

30 Financial Metrics and KPIs to Measure Success in 2026

Measuring and constantly monitoring KPIs are best practices for running a successful
business. The list below describes 30 of the most commonly used financial metrics and
KPIs, complete with formulas and more information on each.

Gross Profit Margin

This is an intermediate — but critical — measure of the profitability and efficiency
of the
company’s core business. It’s calculated as gross profit divided by net sales, and
is
usually expressed as a percentage. Gross profit is
net sales
minus cost of goods sold
(COGS),
which is the direct cost of producing the items sold. Calculating profit as a
percentage of
revenue makes it easier to analyze profitability trends over time and compare
profitability
with other companies. The formula for calculating gross profit margin is:

Gross profit margin = (Net
sales – COGS) / Net
sales × 100%
Return on Sales (ROS)/Operating Margin

This metric looks at how much operating profit the company generates from each dollar
of
sales revenue. It is calculated as operating income, or earnings before
interest
and taxes (EBIT), divided by net sales revenue. Operating
income is
the profit a company makes on sales revenue after deducting COGS and operating
expenses. ROS
is commonly used as a measure of how efficiently the company turns revenue into
profit. The
formula for return on sales is:

Return on sales = (Earnings
before
interest and taxes / Net
sales) × 100%
Net Profit Margin

This is a comprehensive measure of how much profit a company makes after accounting
for all
expenses. It’s calculated as net income divided by revenue. Net income is often
regarded as
the ultimate metric of profitability — the “bottom line” — because it’s the profit
remaining
after deducting all operating and non-operating costs, including taxes. Net profit
margin is
usually expressed as a percentage. The formula for net profit margin is:

Net profit margin = (Net
income / Revenue) × 100%
Operating Cash Flow Ratio (OCF)

This liquidity KPI ratio measures a company’s ability to pay for short-term
liabilities with
cash generated from its core operations. It’s calculated by dividing operating cash
flow by
current liabilities. OCF is the cash generated by a company’s operating activities,
while
current liabilities include accounts payable and other debts due within a year. OCF
uses
information from a company’s statement of cash flows, rather than the income
statement or
balance sheet, which removes the impact of non-cash operating expenses. The formula
for
operating cash flow is:

Operating cash flow ratio
= Operating
cash flow / Current
liabilities
Current Ratio

This shows a company’s short-term liquidity. It’s the ratio of the company’s current
assets
to its current liabilities. Current assets are those that can be converted into cash
within
a year, including cash, accounts receivable and inventory. Current liabilities
include all
liabilities due within a year, including accounts payable. Generally, a current
ratio below
one may be a warning sign that the company doesn’t have enough convertible assets to
meet
its short-term liabilities. The current ratio formula is:

Current ratio = Current
assets / Current liabilities
Working Capital

This liquidity measure is often used in conjunction with other liquidity metrics,
such as the
current ratio. Like the current ratio, it compares the company’s current assets with
its
current liabilities. However, it expresses the result in dollars instead of as a
ratio. Low
working capital may indicate that the company will have difficulty meeting its
financial
obligations. Conversely, a very high amount may be a sign that it’s not using its
assets
optimally. The formula for working
capital is:

Working capital = Current
assets – Current liabilities
Quick Ratio/Acid Test

The quick ratio is a
liquidity
risk KPI that measures the ability of a company to meet its short-term obligations
by
converting quick assets into cash. Quick assets are those current assets convertible
into
cash without discounting or writing down the value. In other words, quick assets are
current
assets – inventory. The quick ratio is also known as the acid test ratio because
it’s used
to measure the financial strength of a business. It reflects the organization’s
ability to
generate cash quickly to cover its debts if it experiences cash flow problems.
Companies
often aim for a quick ratio that’s greater than one. The quick ratio formula is:

Quick ratio = Quick
assets / Current liabilities
Gross Burn Rate

Generally used as a KPI by loss-generating startups, burn rate measures the rate at
which the
company uses its available cash to cover operating expenses. The higher the burn
rate, the
faster the company will run out of cash unless it can attract more funding or
receive
additional financing. Investors often examine a company’s gross burn rate when
considering
whether to provide funding. The gross burn rate formula is:

Gross burn rate = Company
cash / Monthly operating
expenses
Current Accounts Receivable (AR) Ratio

This metric reflects the extent to which the company’s customers pay invoices on
time. It’s
calculated as the total value of sales that are unpaid but still within the
company’s
billing terms in relation to the total balance of all AR. A higher ratio is
generally better
because it reflects fewer past-due invoices. A low ratio shows the company is having
difficulty collecting money from customers and can be an indicator of potential
future cash
flow problems. The current AR formula is:

Current accounts receivable =
(Total
accounts receivable – Past
due accounts receivable) / Total
accounts receivable
Current Accounts Payable (AP) Ratio

This is a measure of whether the company pays its bills on time. It’s the total value
of
supplier payments that are not yet due divided by the total balance of all AP. A
higher
ratio indicates that the company is paying more of its bills on time. Spreading out
payments
to suppliers may ease a company’s cash flow problems, but it can also mean that
suppliers
are less likely to extend favorable credit terms in the future. The formula for
current AP
is:

Current accounts payable = (Total
accounts
payable – Past due
accounts receivable) / Total
accounts
receivable
Accounts Payable (AP) Turnover

This is a liquidity measure that shows how fast a company pays its suppliers. It
looks at how
many times a company pays off its average AP balance in a period, typically a year.
It’s a
key indicator of how a company manages its cash flow. A higher ratio indicates that
a
company pays its bills faster. The formula for AP turnover is:

Accounts payable turnover = Net
Credit
Purchases / Average
accounts payable balance for period
Average Invoice Processing Cost

Average invoice processing cost is an efficiency metric that estimates the average
cost of
paying each bill owed to suppliers. Processing costs often include labor, bank
charges,
systems, overhead, and mailing costs. Factors such as outsourcing and the level
of AP
automation can influence the overall
processing cost. A lower cost indicates a more efficient AP process. The formula for
AP
process cost is:

Average invoice processing cost =
Total
accounts payable processing
costs / Number of invoices
processed
for period
Days Payable Outstanding (DPO)

This is another way to calculate the speed at which a company pays for purchases
obtained on
vendor credit terms. This KPI converts AP turnover into a number of days. A lower
value
means the company is paying faster. The formula for calculating days payable
outstanding is:

Days payable outstanding
= (Accounts
payable × 365
days) / COGS
Accounts Receivable (AR) Turnover

This measures how effectively the company collects money from customers on time. It
reflects
the number of times the average AR balance is converted to cash during a period,
typically a
year. It’s a ratio calculated by dividing net sales by the average AR balance during
the
period. A higher AR turnover is
generally
desirable. The formula for AR turnover is:

Accounts receivable turnover =
Sales on
account / Average
accounts receivable balance for period
Days Sales Outstanding (DSO)

This is another metric that companies use to measure how quickly their customers pay
their
bills. It is the average number of days required to collect accounts receivable
payments.
DSO converts the accounts receivable turnover metric into an average time in days. A
lower
value means your customers are paying faster. The formula for days sales
outstanding is:

Days sales outstanding = 365
days / Accounts receivable
turnover
Inventory Turnover

This operational efficiency metric shows the number of times the average balance of
inventory
was sold during a period, typically a year. In general, a low inventory turnover
ratio can
indicate that the company is buying too much inventory or that sales are weak; a
higher
ratio indicates less inventory or stronger sales. An extremely high ratio could
indicate
that the company doesn’t have enough inventory to meet demand, limiting sales. The
formula
for inventory
turnover is:

Inventory turnover
= COGS / Average
inventory balance for
period
Days Inventory Outstanding (DIO)

This inventory
management
KPI provides another way to determine how quickly the company sells its
inventory. It measures the average number of days required to sell an item in
inventory. DIO
converts the inventory turnover metric into a number of days. The formula for DIO
is:

Days inventory outstanding
= 365
days / Inventory turnover
Cash Conversion Cycle

This calculates how long it takes for a company to convert a dollar invested in
inventory
into cash received from customers. It accounts for both the time needed to sell
inventory
and the time needed to collect payment from customers. It’s expressed as a number of
days.
The formula for operating
cycle is:

Operating cycle = Days
inventory
outstanding + Days sales
outstanding
Budget Variance

This compares the company’s actual performance to budgets or forecasts. Budget
variance can
analyze any financial metric, such as revenue, profitability, or expenses. The
variance can
be stated in dollars or, more often, as a percentage of the budgeted amount. Budget
variances can be favorable or unfavorable, with unfavorable budget variances
typically shown
in parentheses. A positive budget variance value is considered favorable for revenue
and
income accounts, but it can be unfavorable for expenses. The formula for calculating
budget
variance is:

Budget variance = (Actual
result – Budgeted
amount) / Budgeted
amount × 100
Payroll Headcount Ratio

This KPI is a measure of the productivity and efficiency of the HR team. It shows how
many
full-time employees are supported by each payroll or HR specialist. The calculation
is
usually based on full-time equivalent (FTE) headcounts. The formula for payroll
headcount
ratio is:

Payroll headcount ratio = HR
headcount / Total company
headcount
Sales Growth Rate

One of the most critical revenue KPIs for many companies, sales growth shows the
change in
net sales from one period to another, expressed as a percentage. Companies often
compare
sales to the corresponding period during the previous year, or quarter-to-quarter
changes in
sales during the current year. A positive value indicates sales growth; negative
values mean
sales are contracting. The formula for sales growth rate is:

Sales growth rate = (Current
net
sales – Prior period net
sales) / Prior period net
sales × 100
Fixed Asset Turnover Ratio

This shows a company’s ability to generate sales from its investment in fixed assets. This KPI
is especially relevant to
companies that make significant investments in property, plant, and equipment (PPE)
to
increase output and sales. A higher ratio indicates that the company is using those
fixed
assets more effectively. The average fixed asset balance is calculated by dividing
total
sales by net of accumulated depreciation. The formula for fixed asset turnover is:

Fixed asset turnover = Total
sales / Average fixed assets
Return on Assets (ROA)

This efficiency metric shows how well an operations management team uses its assets
to
generate profit. It takes all assets into account, including current assets such as
accounts
receivable and inventory, as well as fixed assets, such as equipment and real
estate. ROA
excludes interest expense, as financing decisions are typically not within operating
managers’ control. The formula for return on assets is:

Return on assets = Net
income / Total assets for
period
Selling, General and Administrative (SG&A) Ratio

This efficiency metric indicates what percentage of sales revenue is used to
cover SG&A expenses.
These
expenses can include a broad range of operational costs, including rent, advertising
and
marketing, office supplies, and salaries of administrative staff. Generally, the
lower the
SG&A ratio, the better. The formula for SG&A ratio is:

SGA = (Selling + General + Administrative
expense) / Net sales revenue
Interest Coverage

A long-term solvency KPI, interest coverage quantifies a company’s ability to meet
contractual interest payments on debt such as loans or bonds. It measures the ratio
of
operating profit to interest expense; a higher ratio suggests that the company can
service
debt more easily. The formula for interest coverage is:

Interest coverage
= EBIT / Interest
expense
Earnings Per Share (EPS)

This profitability metric estimates how much net income a public company generates
per share
of its stock. It’s typically measured by the quarter and by the year. Analysts,
investors,
and potential acquirers often use EPS as a key measure of a company’s profitability
and also
as a way to calculate its total value. EPS can be calculated several ways, but the
most
widely used basic formula is as follows:

Earnings per share = Net
income / Weighted average
number
of shares outstanding

Weighted average is essentially the average number of shares outstanding — or
available —
during a given reporting period. The total number of shares can change due to stock
splits,
stock repurchase, etc. If EPS were based on the total share outstanding at the end
of the
reporting period, companies could manipulate results by repurchasing stock at the
end of a
quarter.
Debt-to-Equity Ratio

This ratio looks at a company’s borrowing and the level of leverage. It compares the
company’s debt with the total value of shareholder’s equity. The calculation
includes both
short-term and long-term debt. A high ratio indicates that the company is highly
leveraged.
This may not be a problem if the company can use the money it borrowed to generate a
healthy
profit and cash flow. The formula for debt-equity ratio is:

Debt-to-equity ratio = Total
liabilities / Total
shareholders’ equity
Budget Creation Cycle Time

This efficiency metric measures how long it takes to complete the organization’s
annual or
periodic budgeting process. It’s usually measured from the time of establishing
budget
objectives to creating an approved, ready-to-use budget. This metric is usually
calculated
as the total number of days.

Budget creation cycle time
= Date
budget finalized – Date
budgeting activities started
Line Items in Budget

The number of line items in a budget or forecast is an indicator of the level of
detail in
the budget. A company can prepare its current budget by adjusting each line item in
a
previous budget to reflect current expectations. Budgets are often prepared at the
account
level or by project. They may include line items that correspond to lines in the
company’s
financial statements.
Number of Budget Iterations

This is a measure of the accuracy and efficiency of the company’s budgeting process.
It is
the number of times a budget is reworked during the budget creation cycle. A highly
manual
process can be more error-prone, leading to a greater number of iterations before
the
company arrives at an accurate budget. Other reasons for an increased number of
iterations
include extensive internal negotiations, changes in business strategy or changes in
the
macro-economic climate. A high number of budget iterations can lead to delays and an
increased budget cycle time, which can hinder the company’s ability to start
executing
toward the goals defined in the budget.

Number of budget iterations
= Total
amount of budget versions created

Measuring and Monitoring KPIs With Financial Management Software

A business’s KPIs and metrics are only as good as allowed by the quantity and quality of
calculations. Manually mapping these can be cumbersome and error-prone. However, automated
processes using AI agents can simplify and accelerate KPI calculation while also handling
cross-functional data source inputs for continuously updated results. With metrics powered
by AI, business leaders can quickly get a real-time pulse of company performance with
automated flags for discrepancies against historical patterns.

To achieve this, NetSuite’s robust accounting and financial management
software includes built-in AI-powered dashboards and KPIs tailored to different
roles and functions within the organization as well as by industry. Users can easily access
AI agents for crunching metrics, add customized KPIs to support specific requirements or
goals, and source data from other connected applications and databases. All information is
automatically updated as the platform processes transactions and other financial data.

Financial KPI FAQs

What are financial KPIs?

Financial KPIs are metrics tied directly to financial values used by companies to monitor and
analyze key aspects of its business. Many KPIs are ratios that measure meaningful
relationships in the company’s financial data, such as the ratio of profit to revenue. KPIs
can be used as indicators of a company’s financial health at any point in time. They are
also widely used to track trends and analyze progress toward strategic goals.

What are examples of KPIs?

Companies use many different financial KPIs. The KPIs a company chooses depends on its goals,
industry, business model, and other factors. Common KPIs include profitability measures,
such as gross and net profit, and liquidity measures, such as current and quick ratios.

What are the five types of performance indicators?

The five primary types of performance indicators are profitability, leverage, valuation,
liquidity, and efficiency KPIs. Examples of profitability KPIs include gross and net margin
and earnings per share (EPS). Efficiency KPIs include the payroll headcount ratio. Examples
of liquidity KPIs are current and quick ratios. Leverage KPIs include the debt-to-equity
ratio.

What are the five key performance indicators?

Each company may choose different KPIs, depending on its goals and operational processes.
Some KPIs are used by a wide variety of companies in different industries, like operating
and net profit margin, sales growth, and accounts receivable turnover. Companies may also
choose KPIs that are specific to their industry. For example, manufacturers may track KPIs
that measure how quickly and efficiently they convert their investment in fixed assets and
inventory into cash, such as fixed asset turnover and inventory turnover.

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