Formulas Every CFO Should Know for Tracking Metrics Use these formulas to calculate the metrics that matter most. By Sarah Murphy Whether you’re a five-person startup or multi-billion-dollar enterprise, your finance function is the beating heart of your organization: it helps you invest profitably, determines where to channel your company’s efforts, how much money you can take off the table as profits, and helps you uncover any unforeseen challenges to your company’s health. That’s where the position of the CFO comes in: as chief financial officer in 2024, it’s your responsibility to keep your hand on your company’s financial pulse, using a handful of metrics to measure relative health, advise of planned investments or initiatives, and identify challenges that might hinder your company’s profitability and growth. Here is a quick recap of some of the most important metrics to track and the formulas to figure them out. For more insight into these metrics, download our Metrics every CFO needs to know (and track) in 2024 guide. Revenue Growth Rate Revenue Growth Rate = (Final Value – Initial Value) / Initial Value Total Revenue Total Revenue = Number of Units Sold * Consumer’s Cost of Product/Service Net Revenue Net Revenue = Gross Revenue – Returns – Discounts – Sales Allowance Revenue Per Customer Revenue per customer = Total Revenue / Customer Count Net Profit Margin Net Profit Margin = (Revenue – Cost of goods sold – Operating expenses – Interest – Taxes) * 100 / Revenue Gross Profit Margin Gross Profit Margin = (Gross Profit * 100) / Total Revenue Gross Margin (%) Gross Margin (%) = Gross Profit / Revenue Operating Profit Margin Operating Profit Margin = (Revenue + Interest + Taxes) * 100 / Net Sales Operating Margin (%) Operating Margin (%) = EBIT / Revenue Net Profit Margin Net Profit Margin (%) = Net Income / Revenue Contribution Margin Contribution Margin = Price per Unit – Variable Cost per Unit Customer Acquisition Cost (CAC) Customer Acquisition Cost (CAC) = (Cost of Sales + Cost of Marketing) / New Customers Acquired Customer Lifetime Value (CLV) Customer Lifetime Value (CLV) = Customer Value (CV) * Average Customer Lifespan (ACL) Churn Rate Churn Rate = (Lost Customers / Total Customers at the Start of Time Period) * 100 Average Revenue Per User (ARPU) Average Revenue per User (ARPU) = Total Revenue / Total Number of Users Average Revenue per User (ARPU) = Total Revenue During Set Time Period / Number of Active Users During Set Time Period Return on Sales Return on Sales = Operating Profit * 100 / Net Sales Revenue Break-even Point (BEP) Break-Even Point (BEP) = Fixed Costs / Contribution Margin Price-Earnings Ratio P/E Ratio = Market Share Price / Earnings per Share (EPS) Earnings Per Share (EPS) Earnings per Share (EPS) = (Net Income – Preferred Dividends) / Weighted Average Number of Shares Outstanding Market Capitalization Market Capitalization = Latest Closing Share Price * Total Diluted Shares Outstanding Debt to Equity Ratio Debt to Equity Ratio = Total Liabilities / Shareholders’ Equity Cash Conversion Cycle (CCC) Cash Conversion Cycle (CCC) = DIO + DSO – DPO Days Inventory Outstanding (DIO) = (Inventory / Cost of Goods Sold) * 365 Days Sales Outstanding (DSO) = (Accounts Receivable / Net Credit Sales) * 365 Days Payable Outstanding (DPO) = (End of Period) Accounts Payable / (Cost of Goods Sold / 365) Operating Cashflow Margin Operating Cash Flow Margin = Operating Cash Flow / Operating Revenue * 100% Operating Cashflow Ratio Operating Cashflow Ratio = Cash From Operations / Current Liabilities Cashflow Return on Investment (CFROI) Cash Flow Return on Investment (CFROI) = Operating Cash Flow / (Total Assets – Total Current Liabilities) Now that you’ve got the formulas, see how to use these metrics to make effective business decisions by downloading our Metrics every CFO needs to know (and track) in 2024 guide. Get the latest blogs from Mesh by subscribing to our newsletter Manage Your Payments With Full Control & Visibility Get Started Sarah Murphy Sarah is a Content Manager for Mesh Payments. Before working in marketing, she completed her Master of Journalism degree at Toronto Metropolitan University (f.k.a. Ryerson University) and worked as an arts journalist in Toronto. She was a content writer for tech companies in the retail and workforce management sectors before joining Mesh in 2022.
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