Financial KPIS – Financial Metrics

 

 

Metric: Net Present Value (NPV)

The Question:

What is the value today of the cash flows I will generate in the future?

Approach:

The value of future money is discounted to achieve present value

Commentary:

Used for budgeting purposes. The Discount Rate may be equivalent to interest earned on investments, WCC, or inflation plus risk.

Key to a convincing NPV calculation is picking the right Discount Rate.

Very similar to Discounted Cash Flow (DCF) analysis.

The Formula:

Net Present Value (NPV) = Rt/ (1+i)^t Or, NPV ($)= (Total cash in – cash out, $) / (1 + Discount %) ^ total yearsIf the Discount Rate is 3%, then in year 1 we discount by 3%, in year 2 by 3% + 3%, and so on

Cost of Capital, Weighted Cost of Capital (WCC)

 

• How much does it cost to get the investment required to fund the marketing activities?
• If you work only with budgets funded out of operating profit, then you may not have to worry about Cost of Capital or WCC
• Cost of Debt: The interest rate paid on a loan
• Cost of Equity: Harder to calculate. May need to look at comparible Price-Earnings Ratios
• Weighted Cost of Capital (WCC): Total effective cost of all debt and equity funding for that company
• Your projected Return on Capital must be more than the Cost of Capital for the CFO to bite

Metric: Economic Value Added (EVA)

The Question:

How much profit in dollar terms have I generated, factoring in borrowing costs for the investment?

Approach:

Net profit after tax (NOPAT) less the cost of capital

Commentary:

Gives an actual dollar figure for revenue generated rather than the percentage shown by ROI. CFO likes the fact that cost of capital is included. Pain the a** to calculate!

The Formula:

Economic Value Added (EVA) = Net Operating Profit After Tax (NOPAT, $) – Cost of Capital ($)
Cost of Capital ($) = Capital Employed ($) * Weighted Average Cost of Capital (WACC, $)

 

Sales & Marketing

• Marketing Industry, Marketing Trade
• Sales Industry, Sales Trade
• The Sales Funnel

Marketing for Dummies Guides

• Marketing for Dummies
• Marketing Plan
• Marketing Strategy
• Positioning
• Differentiation
• Brand Equity
• Brand Marketing
• Direct Marketing
• RFM – Recency Frequency Monetary
• Breakeven Response Rate
• Customer Profitability
• CLV – Customer Lifetime Value
• Loyalty Program
• The 4 Ps
• The Campaign Framework
• The Marketing Budget
• The Marketing Mix

Measuring, Marketing, Metrics & KPIs

• KPI – The One Key Marketing Metric
• Marketing KPIs and Metrics
• Measuring Marketing
• ROMI – Return on Marketing Investment
• Marketing Finance
• Financial KPIs
• Market Share
• Mind Share
• Customer Satisfaction (Cust Sat)
• Net Promoter Score
• Kano Model

Online Marketing/ Digital Marketing

• CPM Advertising
• CPC Advertising
• CPA Advertising
• Click Through Rate (CTR or Click Thru Rate)
• Conversion Rate
• SEO Marketing
• SERP: Search Engine Ranking Page
• Behavioral Email
• Guerilla Marketing