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What are Key Performance Indicators (KPI)?
A Key Performance Indicator (KPI) is essentially a performance measurement. A KPI is a metric typically used on a business to assist on measuring its performance.
Popular KPI for accounting and financial management include:
Revenue Growth: This is a measurement of how well an organisation grows its fee / sales base. It is calculated by taking the difference between the current sales amount to the previous sales amount and dividing by the previous sales amount.
Gross Margin %: Gross margin is net sales less the cost of goods sold. Generally selling and administration expenses are disregarded. The gross margin percentage is calculated as (Net sales – Cost of goods sold) / Net sales.
Overhead %: Can be calculated as total overheads / total revenue.
EBIT %: Can be calculated and earnings before interest and tax (EBIT) / revenue.
EBITDA: Earnings before interest and tax / (EBIT) + Depreciation & Amortisation.
Net Profit %: Net profit after tax / revenue.