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How can the analysis of financial indicators help the company in decision making?

Every entrepreneur has to deal with moments when it is necessary to make difficult decisions. In order to ensure assertiveness in decision making, it is essential to rely on the support of financial indicators .

We are talking about metrics that, when analyzed by an entrepreneur, can direct a company to the best available path.

In this way, the financial indicators are presented as an alternative to make a financial diagnosis of a company. This fact allows entrepreneurs to be assertive when making decisions .

So, follow our article to understand how the analysis of financial indicators can help your company in decision making.

What are financial indicators?

When we talk about financial indicators , we are talking about metrics used as a reference to analyze a company’s financial performance.

Also known as KPIs ( Key Performance Indicators ), they offer the entrepreneur a clearer view of the moment of their company. What is essential for the decision-making moment .

That is, through the analysis of financial indicators , an entrepreneur has at his disposal valuable information about the reality of his company.

A fact that makes them present themselves as a compass, always indicating the best path to follow.

Therefore, there are several models of indicators that can be analyzed in the management of a company. What do you think about understanding what they are?

Keep following our article and find out which financial indicators are used in decision making.

What financial indicators can be evaluated?

From the moment entrepreneurs decide to monitor the financial performance of a company, it is also essential to understand which financial indicators can be evaluated.

Therefore, follow with us some options that can be used in the financial management of your business:

  • Revenues;
  • Gross profit;
  • Balance point;
  • Profit margin;

So, read on to understand how each of the above financial indicators can be evaluated by an entrepreneur. Come on?

Revenues

One of the most important financial indicators of a company is its revenue. Its use is even extremely important to measure the financial health presented by a business.

In this way, the entrepreneur must make the sum of all the values ​​​​that were obtained through his sales, being them of products and services. We’re talking about all the money that should go into your cashier.

From billing, it becomes possible to measure and evaluate a company’s sales performance. This makes it possible to identify whether it is generating cash to cover all its expenses and still make a profit.

Gross profit

Another key financial indicator for a company is its gross profit. We are talking about the difference between the total revenue earned by a business and all its direct and indirect costs.

It is important to note that the costs considered in the gross profit are those associated with the production of a company’s products and services. With that, we have the following formula:

Gross profit = Total revenue – Costs associated with production

Break-even point

When analyzing a company’s financial indicators , the break-even point plays an indispensable role.

We are referring to the moment when the net income obtained by a business equals the sum of all its costs and expenses.

In this way, through the break-even point, an entrepreneur can identify how much his company still needs to sell to cover all its expenses.

The same logic presented above is also used to identify what the sales result should be in order to make a profit .

Profit margin

The profit margin is presented as a percentage used to identify how much profit is intended to be made through a sale.

In this way, its use is essential when pricing your products and services. That’s because, the focus is to make the sale price able not only to cover expenses, but also to generate profit.

Also take the opportunity to follow our article on: Tax incentives: how to get them to reduce your company’s tax expenses .

Profitability

Finally, one of the main financial indicators of a company is its profitability. It is what allows you to identify how much a business has earned in relation to its earnings.

After all, not all money made through a sale is considered profit. There are a number of costs that must, necessarily, be honored by entrepreneurs.

Thus, profitability is used to demonstrate the ability of a company to generate profit.

Therefore, you have just seen the importance behind the analysis of financial indicators for your company. Now, seek to adopt them in your management and thus optimize your financial control.

If you need specialized support in your management, count on the services of John Labunski! Our mission is to provide accounting, administrative, tax and financial solutions for you and your company.

Take the opportunity to contact us and find out how we can help you! Also don’t forget to follow our social media and access our blog to keep up with other content!

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