13 Essential Financial Performance Metrics Every Business Should Track
- Return on Equity (ROE)
- Working Capital
- Quick Ratio
- Return on Assets (ROA)
- Inventory Turnover
- Accounts Receivable Turnover
- Accounts Payable Turnover
- Debt-to-Equity Ratio
- Interest Coverage Ratio
- Net Profit Margin: Tracks profitability. Use it as a KPI to ensure you meet profit targets.
- Return on Assets (ROA): Measures asset efficiency. As a KPI, it shows if you’re using resources well.
- Operating Cash Flow: Monitors cash health. Use it to confirm you have enough cash for operations.
- Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV): In eCommerce, these metrics are vital KPIs. They help you balance marketing spend with long-term revenue.
- Profitability goals: Track Net Profit Margin and Gross Profit Margin to see if you’re making the profits you need.
- Cash‐flow stability: Monitor Operating Cash Flow and Quick Ratio to ensure you can cover bills and invest in growth.
- Efficiency goals: Use Return on Assets (ROA) and Inventory Turnover to check how well you use resources.
- Set benchmarks: Compare each metric to industry averages or your own past performance.
- Identify gaps: If a metric falls short, drill into the underlying numbers (e.g., high COGS reducing gross margin).
- Trend analysis: Track metrics over time to spot improving or declining patterns rather than relying on a single snapshot.
- Optimize Ad Spend
- Compare ROAS (return on ad spend) to CAC. Cut underperforming channels.
- Compare ROAS (return on ad spend) to CAC. Cut underperforming channels.
- Adjust Pricing
- Use Gross Profit Margin data to set prices that cover costs and leave room for profit.
- Use Gross Profit Margin data to set prices that cover costs and leave room for profit.
- Manage Inventory
- Slow-moving items: run promotions to boost Inventory Turnover.
- Fast-moving items: ensure adequate stock to avoid stockouts.
- Slow-moving items: run promotions to boost Inventory Turnover.
- Improve Customer Retention
- Track CLV trends. Launch loyalty programs if CLV falls below target.
- Track CLV trends. Launch loyalty programs if CLV falls below target.
Harry Chu
Founder of TrueProfit & eCommerce Profitability Expert
Harry Chu is the Founder of TrueProfit, a net profit tracking solution designed to help Shopify merchants gain real-time insights into their actual profits. With 11+ years of experience in eCommerce and technology, his expertise in profit analytics, cost tracking, and data-driven decision-making has made him a trusted voice for thousands of Shopify merchants.
