The financial indicators They are extremely useful tools for all companies, since it helps them organize and know their current economic situation. Companies often resort to this tool as it provides them with great services that will facilitate decisions regarding the economic and commercial field.
Financial indicators are called a tool, but in general they are a series of figures that are extracted from all the account statements, accounting reports and other documents that reflect the economic situation of the business. These indicators reflect the results of profit or loss.
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In this article you will find:
Characteristics of financial indicators
Financial indicators are a kind of
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- Financial indicators use the entire financial information of the company, in order to keep a good record of all the figures and movements made.
- They measure the financial stability of the company, since with them comparisons of the previous results are made.
- They embody the real situation of the company, allowing to have more real figures of the entire financial statement.
- All the information is shown numerically. All movements of each of the areas of the company.
Purpose of financial indicators
Various financial indicators can be performed, whether they are overall status of company accounts, the loss statement or that of Profits. In general, the managers or those in charge of the economic area of the company do not use a single indicator or report, they usually put them all together and make a deep comparison to obtain the results that all they throw.
For greater data collection, financial indicators from previous years can be analyzed and compared with current ones. in order to have greater precision in profit and loss figures, as well as in production movements and sales yearly.
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Financial indicators are not only used to analyze the internal economic situation of the company, but also to compare total profits with other competing companies, allowing them to have a better visualization of the desired figures and those obtained throughout the entire Jordanian annual of job.
Who performs the financial indicators?
Those who have the task of analyzing and carrying out the indicators are in charge of the finances of the company, since they have at their disposal data and figures of the entire economic life of the same. Also those who have access to the internal and productive functions of the company.
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What do you get from the financial indicators?
With the information obtained from the indicators, you can learn about the economic stability of the company, debts and losses. The return that it has in terms of capital income. You can obtain comparisons of profitability of the company and the profit in terms of its production.
Types of financial indicators
There are several types of indicators, each one is intended for a function:
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Efficiency indicators
This indicator establishes the relationship between the resources and the productivity of the company, in order to obtain the results of all the processes and the good fulfillment of all the objectives and a good operation of the same.
This indicator has the objective of measuring the efficiency of production and the correct execution of all processes. It focuses on the method of realization and the amount of resources used.
- Inventory in Stock: Focuses on measuring the number of days with the inventory available to sell.
- Inventory turnover: focuses on the cost to credit or cash of inventory.
- Portfolio rotation: focuses on the time in which accounts receivable rotate.
- Asset turnover: measures the profit of what is sold with what is invested in production.
- Collection period: is the period in which the company collects all sales receivable.
- Suppliers: studies the time in which the debt to suppliers is canceled.
Liquidity indicators
This measures the effectiveness of the company to generate cash, to be able to pay off the obligations in a short period of time, as well as accounts payable and all commitments pending. This determines the financial stability that the company has.
It also corresponds to how the company transforms certain current assets into cash.
- Acid test: represents the ease with which the company pays off its outstanding debts.
- Net equity: focuses on the amount of money that the company has left after paying off all its debts.
- Current ratio: this indicates the willingness of the company to pay off all financial commitments.
Productivity indicators
It refers to the production carried out by each staff within the company, focusing on time management, obtaining great efficiency.
- High profit margin and high turnover: this is used by companies with high demand and competition.
- Low utility and high turnover: it works with good efficiency.
Profitability indicators
He talks about how sustainable the company is in terms of good management, comparing costs of sale with costs of production. Analyze the ability of the company to maintain a solid foundation within the current market.
Indebtedness indicators
It focuses on how the company acquires certain obligations in order to finance the production of the company, the investments and all the operations and movements carried out within the financial margin, in addition to how it responds to All of them.
Importance of financial indicators
These indicators fulfill an important task within the financial world of companies, whether on an industrial scale or in the provision of services. It allows analysts to have a clear idea of all the financial movements that said company presents, as well as the amount of profits compared to previous years.
It allows to keep an order about the effectiveness and efficiency of both production and workers, a control of expenses with income and sales margins.
