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Financial statement metrics are numerical measures that are derived from a company's financial statements. These metrics are used by investors, financial analysts, and business owners to evaluate a company's overall financial health, performance, and profitability.
There are several types of financial statement metrics, including:
While financial statement metrics are derived from a company's financial statements and focus on financial performance, non-financial metrics are not directly tied to financial performance and can include measures of customer satisfaction, market share, or environmental impact.
Financial statement metrics provide a quantitative assessment of a company's performance and are crucial for investors and creditors. In contrast, non-financial metrics offer a more qualitative view of a company's performance and can be particularly important for internal management.
How to Calculate Financial Statement Metrics:
Calculating financial statement metrics involves using formulas that combine different figures from a company's financial statements. For example, to calculate the net profit margin, you divide net income by total revenue and multiply by 100 to get a percentage. Each metric has its own specific formula.
Financial statement metrics are important for several reasons:
In simple terms, financial statement metrics are like the vital signs of a company's financial health. They are numerical measures derived from a company's financial statements that provide insights into profitability, liquidity, efficiency, solvency, and valuation. These metrics are crucial for decision-making, performance evaluation, risk assessment, and investment analysis.