(What they are and how to measure) Comparison Priorities Decisions Communication Public Company Stock Market Departments Personnel Performance Management.
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(What they are and how to measure) Comparison Priorities Decisions Communication Public Company Stock Market Departments Personnel Performance Management Usage Predictive Forecasting Other Companies IT Management Staff Who should determine the appropriate KPI’s for a company? Where to get KPIs Given • • • • Quick Pre-defined IT can manage Save time and effort Some Adoption Short lived Developed • • • • Participation Discovery Commitment Belief Full Adoption Longevity Employees Stakeholders Debt Asset Management Cash Flow Indicators Market Value DEBT Asset Coverage Ratio Capitalization Ratio Debt Ratio Debt Service Coverage Ratio Debt-toEquity Ratio DEBT Debt-toIncome Ratio Debt/EBITDA Ratio Equity Multiplier Financial Leverage Fixed Assets to Net Worth DEBT Long Term Debt to Capitalization Ratio Fixed Charge Coverage Ratio Interest Coverage Ratio (ICR) LIQUIDITY Acid-Test Ratio Cash Ratio Current Ratio Net Working Capital Quick Ratio LIQUIDITY Working Capital Working Capital Ratio FINANCIAL Cash Return on Capital Invested (CROCI) DuPont Formula Earnings Before Interest After Taxes (EBIAT) EBIT (Earnings Before Interest and Taxes) EBITDA FINANCIAL EBITDARM EBT (Earnings Before Tax) Effective Rate of Return Gross Profit Margin Net Profit Margin FINANCIAL NOPLAT (Net Operating Profit Less Adjusted Taxes) OIBDA Operating Expense Ratio Operating Margin Overhead Ratio FINANCIAL Relative Return Profit Analysis Profitability Index Return On Assets (ROA) Return on Average Assets (ROAA) FINANCIAL Return on Average Capital Employed (ROACE) Return on Average Equity (ROAE) Return On Capital Employed (ROCE) Return on Debt (ROD) Return On Equity (ROE) FINANCIAL Return on Net Assets (RONA) Return On Invested Capital (ROIC) Return on Investment (ROI) Return on Research Capital (RORC) Return on Retained Earnings (RORE) FINANCIAL Revenue per Employee Return on Revenue (ROR) Return On Sales (ROS) Accounts ASSET Payable Asset Turnover MANAGEMENT Turnover Ratio Cash Conversion Cycle (Operating Cycle) Days Payable Outstanding (DPO) Days Sales Outstanding (DSO) ASSET MANAGEMENT Defensive Interval Ratio (DIR) Inventory Turnover Receivable Turnover Ratio Fixed Asset Turnover CASH FLOW INDICATOR Cash Flow Coverage Ratio Cash Flow Management Cash Flow Return on Investment (CFROI) Free Cash Flows / Operating Cash Flows Ratio Price / Cash Flow Ratio MARKET VALUE Business Valuation Dividend Payout Ratio Dividend Policy Ratios Dividend Yield Enterprise Value (EV) MARKET VALUE Gordon Growth Model Enterprise Value Multiple EV/EBITDA ratio Loan-to-Value Ratio (LTV) Net Asset Value per Share (NAVPS) MARKET VALUE PEG ratio Price-toResearch Ratio Price/Book Value Ratio Price to Earnings Ratio (P/E Ratio) Pick the right ones for your business Gartner /EBRC KPI Initiative AICPA KPMG, Deloitte, PWC From Sales to Professional Services Approximately 30 Measures Found All are valid… Narrow the focus… 3 are important Top 3 Take-Aways Multiple People Multiple Departments How and when will they be used Keep it simple The result is more important than the tool It is NOT a techie solution questions? final thoughts?