What you need to know about key figures in finance

A key figure indicating how many days of capital are tied up in operations before it is received back into the account as cash. It combines the three working capital metrics DSO, DIO, and DPO into a single value, thus making the entire cash flow transparent. Formula: DSO + DIO − DPO

A key performance indicator (KPI) that shows how many days goods remain in storage on average before being sold. Every day of in-stock inventory (DIO) ties up capital and incurs storage costs, as well as the risk of write-offs for obsolete inventory. A central control parameter, particularly in trade and manufacturing. Formula: (Inventory / Cost of Goods Sold) × 365

A key performance indicator (KPI) that shows how many days, on average, pass before supplier and service provider invoices are paid. A high value means that suppliers are pre-financing your business interest-free – but can negatively impact early payment discounts and supplier relationships. Formula: (outstanding supplier invoices / cost of goods sold) × 365

A key performance indicator (KPI) that shows how many days, on average, pass between invoicing and receipt of payment. A high value ties up capital, as customers are effectively financed interest-free. The most important levers for reducing this are faster invoicing, clear payment terms, and a consistent dunning process. Formula: (outstanding customer invoices / annual revenue) × 365

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) – this figure represents the operating profitability of a company, independent of its financing structure, tax situation, and depreciation from previous investments. It is not shown as a separate line item in a traditional profit and loss statement (P&L) but is compiled from operating profit and depreciation.

Equity as a percentage of total assets. It shows what part of the company is financed from its own resources and is considered a key indicator of financial stability, resilience to crises, and bank ratings. In German SMEs, the average is around 30%; values ​​below 10% are considered critical. Formula: (Equity / Total Assets) × 100

A key figure that relates net debt to EBITDA. It answers how many years of operating profit would theoretically be needed to fully repay the debt, thus linking the balance sheet (debt) and the income statement (revenue). A ratio of approximately 2.5–3 is considered sound; from 4–5 onwards, the financial leeway becomes limited for most medium-sized companies. Formula: Net debt / EBITDA

The balance of interest-bearing financial liabilities (loans, overdrafts, leases) less liquid assets (cash and bank balances). This summarizes the actual level of debt financing in a single figure. It only becomes meaningful when compared to EBITDA (see leverage factor). Formula: interest-bearing financial liabilities − liquid assets

Working capital is capital tied up in ongoing business operations: in unsold goods or unbilled work, as well as outstanding customer receivables, less liabilities to suppliers and service providers. It grows with increasing sales and can lead to liquidity bottlenecks despite profits. Actively managed working capital makes it possible to finance growth largely from internal resources.

A key figure that shows how often interest expense is covered by operating profit. It indicates whether a company can sustainably cover its interest burden from its ongoing business. Values ​​around 1.5 or below are considered critical – especially with variable financing or pending refinancing. The calculation can be based on either EBIT or EBITDA; a consistent methodology is essential. Formula: EBIT / Interest Expense