ROI vs ROIC vs ROE vs ROCE vs ROA

 

ROI vs ROIC vs ROE vs ROCE vs ROA
Most CEOs use these metrics.
Few actually understand them.

Let’s break it down:

1️⃣ ROI: Return on Investment

• Formula: ROI = (Net Profit / Cost of Investment) * 100%

• Good for: Simple, one-off projects or campaigns.

• Caveat: It ignores the time value of money, so it’s not great for long-term investments.

2️⃣ ROIC: Return on Invested Capital

• Formula: ROIC = EBIT (1-Tax) / (Long-Term Debt + Equity - Non-Operating Cash)

• Good for: Evaluating how efficiently a company uses its invested capital.

• Caveat: If a company has large non-operating cash, this number might look artificially strong.

3️⃣ ROE: Return on Equity

• Formula: ROE = Net Income / Equity

• Good for: Investors who want to know how well their equity is being used.

• Caveat: Be cautious—excessive leverage can inflate ROE, making it seem better than it is.

4️⃣ ROCE: Return on Capital Employed

• Formula: ROCE = EBIT / (Long-Term Debt + Equity)

• Good for: Measuring profitability and efficiency in capital usage.

• Caveat: It doesn’t account for the cost of debt, which can make it less reliable for heavily leveraged companies.

5️⃣ ROA: Return on Assets

• Formula: ROA = Net Income / Total Assets

• Good for: Understanding how effectively a company uses its assets to generate profit.

• Caveat: ROA tends to look lower for capital-intensive industries because it includes depreciation.

The takeaway?

No single metric tells the whole story.

• Use ROI for campaign or project analysis.
• Use ROIC to measure long-term efficiency.
• Use ROE to evaluate equity returns for investors.
• Use ROCE to understand capital efficiency.
• Use ROA to assess how well assets are being used.

https://tinyurl.com/3xp95xn3

What is EBITDA?

 

The CFO’s shortcut to understanding EBITDA

A finance manager I coached last week was drowning in metrics during a board preparation

But one number kept coming back on every slide: EBITDA
and nobody agreed on what it really meant.

Here’s the moment he realized:

He wasn’t dealing with a profit metric

He was dealing with a signal of operational performance

If you’ve ever been in that position, this is for you.

Here’s what’s inside:

1. What EBITDA actually is
Earnings before interest, taxes, depreciation, and amortization - a clean view of core operations

2. Why CFOs rely on it
Strips out financing noise so you can compare companies without capital structure distortions

3. How to calculate it
Start with Net Income → add back interest, taxes, depreciation, and amortization

4. EBITDA vs. Net Income
One shows operational performance; the other shows the final profit after everything

5. Its biggest limitations
Doesn’t include CapEx, hides debt burden, and can overstate cash flow

6. When to use EBITDA
Useful for comparing companies in the same industry or valuing with multiples

7. When NOT to use it
Not great for cash flow analysis, cross-industry benchmarking, or assessing true profitability

8. Your mental model
EBITDA = performance of the engine
Net Income = performance of the whole car

EBITDA is a powerful metric, but only when you know precisely what it signals and what it hides

https://tinyurl.com/4k9fcx9f

50 Finance KPIs Cheat Sheet

 

You see a lot of KPI lists ,but they miss something:
1) These lists do not explain the goal of the KPI
2) These lists do not give you the KPI formula

In this Cheat Sheet, you get both!
Because a KPI is not helpful without explanation and without a formula...

Take it as a catalog from which you can pick 3 to 4 key KPIs.

I like to take 4 KPIs to make a 4-quadrant dashboard.

The standard quadrant I would recommend?

This one:

1. Revenue Growth
2. Net Profit Margin
3. Operating Cash Flow
4. Employee engagement

What would be yours?

You can pick in the 50 following KPIs:

🧾 Accounting KPIs:
1. Debt-to-Equity Ratio
2. Invoice Processing Time
3. Working Capital Ratio
4. Net Profit Margin
5. Return on Equity
6. Gross Profit Margin
7. Accounts Receivable Turnover
8. Fixed Asset Turnover
9. Accounts Payable Turnover
10. Inventory Turnover

💰 Cash KPIs:
11. Operating Cash Flow
12. Days Payables Outstanding
13. Average Days Delinquent
14. Days Sales Outstanding
15. Days of Inventory Outstanding
16. Cash Burn Rate
17. Free Cash Flow
18. Cash Conversion Cycle
19. Cash Reserves in Days
20. Overdues Ratio

👨‍💼 CEO KPIs:
21. Revenue Growth
22. Market Share
23. Employee Productivity
24. Innovation Index
25. Brand Equity
26. Market Expansion
27. Sustainability Metrics
28. Employee Engagement
29. Employee Turnover
30. Cash Flow

🖥 SaaS KPIs:
31. Lifetime Value
32. SaaS Quick Ratio
33. New Buyer Growth Rate
34. ARR Per FTE
35. Customer Churn Rate
36. Runway
37. Customer Acquisition Costs
38. Monthly Recurring Revenue
39. Average Revenue Per User
40. Total Addressable Market

💼 Investors KPIs:
41. Earnings per Share
42. Quick Ratio
43. Dividend Payout Ratio
44. Current Ratio
45. Return on Investment
46. Share Buyback Ratio
47. Price-to-Earnings Ratio
48. Gross Margin Ratio
49. Dividend Yield
50. Net Promoter Score

https://tinyurl.com/4fh2my8j