KPI stands for key performance indicator, a quantifiable measure of performance over time for a specific objective. KPIs provide targets for teams to shoot for, milestones to gauge progress, and insights that help people across the organization make better decisions. From finance and HR to marketing and sales, key performance indicators help every area of the business move forward at the strategic level.
Why Are KPIs Important?
- Keep your teams aligned
- Provide a health check
- Make adjustments
- Hold your teams accountable
Expense is really the opposite of revenue. It represents the outflow of economic benefits arising from the ordinary operations of a business. This loss of benefits will result in either a decrease in assets (such as cash) or an increase in liabilities (such as amounts owed to suppliers). Expenses are incurred in the process of generating revenue or, at least, in attempting to generate it. The nature of the business will again determine the type of expenses that will be incurred. Examples of some of the more common types of expense are:
- The cost of buying or making the goods that are sold during the period concerned known as the cost of sales or cost of goods sold
- Salaries and wages
- Rent motor vehicle running expenses
- Printing and stationery
- Heat and light
- Telephone and postage.
Revenue is simply a measure of the inflow of economic benefits arising from the ordinary operations of a business. These benefits will result in either an increase in assets (such as cash or amounts owed to the business by its customers) or a decrease in liabilities. Different forms of business enterprise will generate different forms of revenue. Some examples of the different forms that revenue can take are as follows:
- Sales of goods (for example, by a manufacturer)
- Fees for services (for example, of a solicitor)
- Subscriptions (for example, of a club)
- Interest received (for example, on an investment fund).
The statement of cash flows. This statement reports the movements of cash over a period and the effect of these movements on the cash position of the business. It is an important financial statement because cash is vital to the survival of a business. Without cash, a business cannot operate.
The statement of cash flows summarises the inflows and outflows of cash (and cash equivalents) for a business over a period. To aid user understanding, these cash flows are divided into categories. Cash inflows and outflows falling within each category are added together to provide a total for that category. These totals are shown on the statement of cash flows and, when added together, reveal the net increase or decrease in cash (and cash equivalents) over the period.
The cash flows of a business are divided into categories:
- Cash flows from operating activities
- Cash flows from investing activities
- Cash flows from financing activities.
A feasibility study is a detailed analysis that considers all of the critical aspects of a proposed project in order to determine the likelihood of it succeeding.
A feasibility study is an assessment of the practicality of a proposed plan or project. A feasibility study analyzes the viability of a project to determine whether the project or venture is likely to succeed. The study is also designed to identify potential issues and problems that could arise while pursuing the project.
Importance of feasibility studies
- Identifies valid reasons to advance or veto a project idea
- Improves the focus of the project team
- Provides useful information for the next steps after the study
- Narrows potential business alternatives
- Evaluates current and needed resources and technology
- Enhances the success or failure rate of the project by assessing all variables
- Estimates the return on investment
What Are the 4 Types of Feasibility?
The study considers the feasibility of four aspects of a project:
- Technical:A list of the hardware and software needed, and the skilled labour required to make them work.
- Financial:An estimate of the cost of the overall project and its expected return.
- Market:An analysis of the market for the product or service, the industry, competition, consumer demand, sales forecasts, and growth projections
- Organizational:An outline of the business structure and the management team that will be needed.
Valuation refers to the process of determining the present value of a company, investment, or an asset. There are several common valuation techniques, as described below. Analysts who want to place a value on an asset normally look at the prospective future earning potential of that company or asset.
Reasons for performing a valuation
- Buying or selling a business
- Strategic planning
- Capital financing
- Securities investing
Exit strategies are plans executed by business owners, investors, traders, or venture capitalists to liquidate their position in a financial asset upon meeting certain criteria. An exit plan is how an investor plans to get out of an investment.
When Are Exit Strategies Used?
- Close down a non-profitable business
- Execute an investment or business venture when profit objectives are met
- Close down a business in the event of a significant change in market conditions
- Sell an investment or a company
- Sell an unsuccessful company to limit losses
- Reduce ownership in a company or give up control
Exit Strategies That most of the Investors Will Accept
- M&A – Merger or Acquisition by another company.
- IPO – public company initial public stock offering.
- Find a private equity firm or a friendly individual.
- Position the company as a cash cow to fund spinoffs.
- Liquidate the assets, cash out investors, and keep the rest.
- No exit.
Financial graphs and charts are visual tools that allow companies to monitor various performance metrics in areas such as liquidity, budgets, expenses, cash flow, and others. By doing so, they can successfully manage risks to ensure healthy finances and steady growth. Graphs and charts condense large amounts of information into easy-to-understand formats that clearly and effectively communicate important points.