Examples of Key Financial

Performance Measures
The KPI Examples Review

Copyright 2017 The KPI Examples Review.

http://kpi-examples.blogspot.com/.
 Introduction

In this report we define the key financial performance measures

based on web search data in 2015. For some of the key financial
measures were defined their formulas and calculation examples. In all
our calculations we used the official financial statements of Siemens
AG.
 1. List of the 5 Key Financial Performance Measures

Based on the web search data in 2015, we define the 5 key financial
indicators used to measure a company's performance:
1). Net income (net profit, net earnings);
2). Earnings before interest and taxes (EBIT)/ operating income
(operating profit);
3). Gross profit;
4). Current ratio (working capital ratio);
5). Return on investment (ROI).[1]

Source: "List of the 12 Most Important Financial Indicators" (PDF),

http://kpi-examples.blogspot.com/2017/06/key-financial-indicators-financial-measures.html.
 All financial measures were divided by the three categories.

The first category of financial measures – profit measures:

– net income (net profit, net earnings);
– earnings before interest and taxes (EBIT)/ operating income
(operating profit);
– gross profit.

The second category of financial measures – profitability ratios:

– return on investment (ROI).

The third category of financial measures – liquidity ratios:

– current ratio (working capital ratio).[1]
 2. Examples of Financial Measures

Net income (net profit, net earnings)

The formula for calculating net income is:

Net income = TR – TE , (2.1)

where
TR – Total Revenue;
TE – Total Expenses.[1]

Example of calculating. Based on the consolidated statements of

income (D.1)[2] for the fiscal years ended september 30, 2014 and 2013,
we can calculate the net income for the company Siemens AG (Table
2.1).
Table 2.1. The calculation of net income for the company Siemens AG
on the basis of the consolidated statements of income in 2013-2014

(in millions of €) 2014 2013

Revenue 71,920 73,445
Cost of sales (51,165) (53,309)
Research and development expenses (4,065) (4,048)
Selling and general administrative expenses (10,424) (10,869)
Other operating income 656 500
Other operating expenses (194) (424)
Income from investments accounted for using the
582 510
equity method, net
Interest income 1,058 947
Interest expenses (764) (784)
Other financial income (expenses), net (177) (154)
Income tax expenses (2,028) (1,634)
Income from discontinued operations, net of
108 231
income taxes
Net income 5,507 4,409
 Net income = 71920000 – 51165000 – 4065000 – 10424000 + 656000 –
194000 + 582000 + 1058000 – 764000 – 177000 – 2028000 + 108000 =
€5,507 million.[1]

Source: "List of the 12 Most Important Financial Indicators" (PDF),

http://kpi-examples.blogspot.com/2017/06/key-financial-indicators-financial-measures.html.
 Return on Investment (ROI)

The formula for calculating return on investment is:

ROI = (GFI – CFI) / CFI , (2.2)

where
GFI – Gain from Investment;
CFI – Cost from Investment.[3]

The return on investment may also be calculated by dividing net

income by long-term investments (2.3) or average long-term
investments (2.4):

ROI = NI / LTI = NI / (LTD + TSE) , (2.3)

where
NI – Net income;
LTI – Long-term investments;
LTD – Long-term debt;
TSE – Total shareholder equity.

ROI = NI / ALTI = NI / ((LTDBP + LTDEP) / 2 + (SEBP +SEEP) / 2)) , (2.4)

where
NI – Net income;
ALTI – Average long-term investments;
LTDBP – Long-term debt at the beginning of a period;
LTDEP – Long-term debt at the end of a period;
SEBP – Shareholder equity at the beginning of a period;
SEEP – Shareholder equity at the end of a period.[3]

Source: "Financial KPI: Examples of Profitability Ratios",

http://kpi-examples.blogspot.com/2016/01/financial-kpi-examples-of-profitability-ratios-.html.
Current Ratio (Working Capital Ratio)

The formula for calculating current ratio is:

Current ratio = TCA / TCL , (2.5)

where
TCA – Total current assets;
TCL – Total current liabilities.[3]

Source: "Financial KPI: Examples of Liquidity Ratios",

http://kpi-examples.blogspot.com/2016/01/financial-kpi-examples-of-liquidity-ratios.html.
 References

1. The KPI Examples Review, "List of the 12 Most Important Financial Indicators",
http://kpi-examples.blogspot.com/2017/06/key-financial-indicators-financial-measures.html.
2. Siemens AG, "Siemens Annual Report 2014, Consolidated Financial Statements",
https://www.siemens.com/annual/14/en/download/pdf/Siemens_AR2014_ConsolidatedFinanci
alStatements.pdf.
3. The KPI Examples Review, "List of Key Financial Performance Measures: How to Measure
Financial Performance: Measurement Tools, Key Financial Measures of Performance, Financial
Ratios to Measure Performance, Measurement of Financial Performance, Measures of
Financial Performance, Finance, Define Financial Performance, Evaluating Financial
Performance",
http://kpi-examples.blogspot.com/2017/06/how-to-measure-financial-performance-measures.html.
 "List of the 12 Most Important Financial Indicators"
(eBook)

In this report we define the 12 most important financial

indicators based on web search data in 2015. All financial
indicators were divided by the six categories: profit measures, cash
flow measures, profitability ratios, liquidity ratios, solvency ratios
and capital market ratios (Chapter 1).
For each of the financial indicators were defined their popularity
in different countries, their formulas and calculation examples
(Chapter 2). In all our calculations we used the official financial
statements of Siemens AG for the fiscal years ended september 30,
2014 and 2013, namely the consolidated statements of income
(D.1), financial position (D.3), cash flows (D.4), changes in equity
(D.5), notes to consolidated financial statements (D.6).
"List of the 12 Most Important Financial Indicators" (PDF) presented on the web page:
http://kpi-examples.blogspot.com/2017/06/how-to-measure-financial-performance-measures.html.