Question

How are key performance indicators different from financial statement ratio analysis?

How are key performance indicators different from financial statement ratio analysis?

Homework Answers

Answer #1
  • Key Performance Indicators or KPI is a set of measurements used to gauge company's overall performance not only financial performance like company's success versus targets and objectives achieved
  • It can be financial as well as anecdotal like footfall in-store, customer repetition, employee retention, attrition rate, etc
  • In financial it includes the profit margins, top-line, bottom-line, and current ratios. But it is not restricted to only these parameters but the company's relationship with customers and employees is equally important.
  • CLV (customer lifetime value) is a key metric followed to gain customer satisfaction and value generated from it.

So, KPI include quantitaive as well as qualitative parametrs which covers the whole organisation in various aspects.

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