The 4 Most Important Financial Metrics

Metrics are significant since it acts as identifiers o determiners in choosing what

would be the best and optimal decision. The business world is full of decision-making,
whether to invest or not, approve or not, take it or leave it. Changes, volatility, along with
internal and external factors, are looming in the industries that’s why calculating risks and
learning how to mitigate losses should be one of the most important things to learn in
terms of decision-making for the company. It is when financial metrics comes in the
context. Through the video I watched, I have learned the four most important financial
metrics that would be helpful when I pursue my profession in the corporate world in the
future. It is a video by Phil Town on his YouTube channel Phil Town’s Rule #1 Investing
entitled “The 4 Most Important Financial Metrics”.

The key numbers or values found in the financial statements such as the Balance
Sheet, Income Statement, and the Cash Flow are called financial metrics. It measures
certain amounts and ratios to determine whether the company’s performance is doing
great or not, and whether to proceed or not with the plan implementation, and most
importantly as investors to evaluate a company. In Balance Sheet, liquidity could be
acquired by getting the current ratio or the Current Assets divided by the Current
Liabilities, in short, the working capital. It compares the current assets with current
liabilities and foresee if the liquidity of assets can cover all the current obligations 2:1 is
the recommended ration to be considered a good company. Income Statement has
growth of earnings and growth of net income, and it should be parallel with one another
to ensure growth rate of both earnings and sales. Another one found in the Income
Statement are the returns such as ROA, ROE, ROC which measures accomplishments
relative to the money being invested to get the earnings. Lastly, the Cash Flow brings
forth the OCF or the FCF (Free Cash Flow) to identify the amount of cash for company’s
growth and improvement.

These are all taught in ACYFMG 1 and it’s interesting to know that other people
have the same opinion about it. It really means that what we are learning now in school
can be utilized to face real life challenges when we go on with our profession.

VIDEO LINK: https://tinyurl.com/The4MostImptFinancialMetrics