Finance metrics: formulas and SQL
Margins, liquidity, cash and efficiency ratios. These are standard accounting definitions, but they depend on how your ledger categorises costs, so reconcile to the source of record.
- Gross Profit MarginGross profit margin is the percentage of revenue left after paying the direct costs of producing what you sold.
- Net Profit MarginNet profit margin is the percentage of revenue that remains as profit after all expenses, interest and taxes.
- Operating MarginOperating margin is the share of revenue left after operating costs, before interest and tax.
- EBITDA MarginEBITDA margin is earnings before interest, tax, depreciation and amortisation as a percentage of revenue.
- Working CapitalWorking capital is current assets minus current liabilities: the short-term resources available to run the business.
- Current RatioThe current ratio compares current assets with current liabilities to show whether a business can pay its short-term obligations.
- Acid-Test (Quick) RatioThe acid-test ratio compares the most liquid assets with current liabilities, leaving out inventory.
- Burn RateBurn rate is how much cash a business spends each month in excess of what it earns.
- Cash RunwayCash runway is how many months a company can operate before running out of cash at the current burn rate.
- Days Sales Outstanding (DSO)Days sales outstanding is the average number of days it takes to collect payment after a sale.
- Days Payable Outstanding (DPO)Days payable outstanding is the average number of days a company takes to pay its suppliers.
- Budget VarianceBudget variance is the difference between what you planned to spend or earn and what actually happened.
- Return on Investment (ROI)Return on investment compares the gain from an investment with its cost, as a percentage.
- Cash Conversion CycleThe cash conversion cycle is the number of days it takes to turn money spent on inventory back into cash from sales.