Term
Financial Measures
What are financial measures?
Answer
Definition
Quantitative metrics related to money, such as profit, revenue, and liquidity ratios.
Understanding business health requires looking beyond monetary reports. We differentiate between quantitative financial results and the qualitative drivers behind them.
A common misconception is that profit guarantees solvency. The timing of transactions is crucial.
What are financial measures?
Quantitative metrics related to money, such as profit, revenue, and liquidity ratios.
What are non-financial measures?
Qualitative or performance indicators that do not involve monetary data directly, e.g., customer satisfaction and employee turnover.
Why is it important to use both financial and non-financial measures?
To get a balanced view of business performance, combining objective financial insight with factors driving results.
What is profit?
The difference between total revenue and total costs over a period.
What is cash flow?
The actual inflow and outflow of cash affecting a business’s ability to pay bills and operate.
Can a business be profitable but have cash flow problems?
Yes, if payments are delayed, a business may be profitable but still face cash flow issues.
Give examples of financial measures.
Profit, revenue, return on investment, liquidity ratios.
Give examples of non-financial measures.
Customer satisfaction, employee turnover, product quality, brand strength.