Episode E.013 Creating Results Metrics

Financial​
The overall financial performance of the company as specified in the yearly Operational Plan.

​C + P + T = Financial Results

• Revenue
• Earnings 
• Net Investment

Revenue
The amount of money the company collects based on selling its offer. It is usually referred to as Top Line and comes from

• Revenue from Sales:  often referred to as the “top line” because it sits at the top of the income statement, income generated before any expenses are subtracted from the calculation. 
• Revenue from Invested Capital: revenue from investments made by the company, a calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. The return on invested capital ratio gives a sense of how well a company is using its money to generate returns. 

to determine the total amount of money collected during a period, which is usually defined as a quarter (three calendar months or 13 weeks) or a year. 

Earnings
The amount of money the company keeps after all expenses, taxes, etc., have been paid. Starting with Revenue, you subtract

• Production Costs (materials, labor, overhead)
• Selling Costs (cost of sales)
• Taxes (federal, state, local)

to determine the amount of profit produced during a specific period, which is usually defined as a quarter (three calendar months or 13 weeks) or a year. 

Net Investment
The amount of the money the company retains for reinvestment in improvements and growth. It is based on

• Working Capital (inventory, accounts receivable, cash, liabilities)
• Permanent Investment (investors)
• Funded Debt (current debt)

to indicate how much a company is spending to maintain and improve its operations. If net investment is positive, the company is expanding its capacity.
If net investment is negative, its capacity is shrinking.

This is a more sophisticated way at looking at the traditional

• Assets - Liabilities = Retained Earnings measure of company performance over a specified period usually defined as a quarter (three calendar months or 13 weeks) or a year.

Next Show: E.014 Putting Your Metrics Together