Every metric, in plain English.

Gross Margin

Gross margin is the percentage of revenue left after the direct cost of producing your product or service.

Operating Margin

Operating margin is the percentage of revenue left after both direct costs (COGS) and operating expenses like rent, salaries, and overhead.

EBITDA

EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization — a measure of operational cash earnings.

EBITDA Margin

EBITDA margin is EBITDA as a percentage of revenue — the most common shorthand for how profitable a business is at an operational level.

Net Margin

Net margin is the percentage of revenue you actually keep after every expense — including taxes and interest.

Current Ratio

Current ratio measures whether you have enough short-term assets to cover your short-term obligations.

Quick Ratio (Acid-Test Ratio)

Quick ratio is the stricter sibling of the current ratio — it excludes inventory, which isn't always easy to convert to cash.

Working Capital

Working capital is the dollar amount of current assets minus current liabilities — the cash cushion your operations have.

Cash Conversion Cycle

Cash conversion cycle is the number of days between paying for inventory and getting paid by customers.

DSCR (Debt Service Coverage Ratio)

DSCR measures whether your business generates enough cash to cover its annual debt payments.

Debt to EBITDA

Debt to EBITDA shows how many years of earnings it would take to pay off your total debt.

Debt to Equity Ratio

Debt to equity shows how much of your business is financed by lenders versus owners.

Debt to Assets

Debt to assets measures what percent of your total assets are funded by debt versus equity.

Interest Coverage Ratio

Interest coverage shows how many times over your operating profit can pay your annual interest expense.

Days Sales Outstanding (DSO)

DSO is the average number of days it takes for customers to pay you after you send an invoice.

Days Inventory Outstanding (DIO)

DIO is the average number of days inventory sits on your shelves before being sold.

Days Payable Outstanding (DPO)

DPO is the average number of days you take to pay your suppliers.

Inventory Turnover

Inventory turnover is how many times per year your inventory cycles through the business.

Receivables Turnover

Receivables turnover is how many times per year you collect your average accounts receivable balance.

Payables Turnover

Payables turnover is how many times per year you pay off your average accounts payable balance.

Food Cost Percentage (Restaurants)

Food cost is the cost of ingredients as a percentage of food sales — the single most important number in restaurant economics.

Labor Cost Percentage (Restaurants & Services)

Labor cost is total wages and payroll taxes as a percentage of revenue — the second pillar of restaurant economics alongside food cost.

Prime Cost (Restaurants)

Prime cost is food cost plus labor cost combined — the single number that decides whether a restaurant can be profitable.

Occupancy Cost (Restaurants & Retail)

Occupancy cost is total rent, common-area maintenance (CAM), real-estate taxes, and insurance — expressed as a percentage of sales. It is the largest fixed cost most physical businesses carry, and the ratio that's considered healthy varies sharply by format (grocery vs. mall-based specialty retail vs. urban full-service restaurant are not the same game).

Inventory Shrinkage (Retail)

Inventory shrinkage is the gap between book inventory and physical inventory — the value of merchandise lost to theft, fraud, administrative errors, vendor errors, and damage. The National Retail Federation publishes annual shrink reports tracking the industry rate.

Rule of 40 (SaaS)

The Rule of 40 says a healthy SaaS company's revenue growth rate plus EBITDA margin should add up to at least 40.

Burn Multiple (Startups)

Burn multiple measures how much cash a startup burns to generate $1 of new annual recurring revenue (ARR).

Runway (Startups)

Runway is how many months until your cash runs out at the current burn rate.

Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is the fully-loaded cost to acquire one new paying customer — sales + marketing spend divided by new customers won in the same period.

Customer Lifetime Value (LTV)

Customer Lifetime Value (LTV) is the total gross profit you expect to earn from a customer across their entire relationship with you.

LTV:CAC Ratio

LTV:CAC ratio compares the lifetime profit of a customer to the cost of acquiring them. The widely-quoted benchmark is 3:1 — three dollars of customer profit for every one dollar spent on acquisition.

Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue (MRR) is the normalized monthly subscription revenue a business expects, excluding one-time fees, setup charges, and overages.

Net Revenue Retention (NRR)

Net Revenue Retention (NRR) measures how much of last year's revenue from existing customers you kept — including expansion, downgrades, and churn — without counting any new customers won.

Gross Revenue Retention (GRR)

Gross Revenue Retention (GRR) measures the percentage of recurring revenue you retained from existing customers — counting only churn and downgrades. Unlike NRR, it excludes expansion, so it is capped at 100% and shows pure customer-base durability.

CAC Payback Period

CAC Payback Period is the number of months a new customer's gross margin must cover before you recoup what you spent acquiring them.

Average Order Value (AOV)

Average Order Value (AOV) is total revenue divided by the number of orders in a period. It is the single biggest lever for e-commerce profitability after gross margin.

Same-Store Sales Growth

Same-Store Sales growth (also called comparable sales or comps) measures revenue change at locations open for at least a year — isolating organic growth from new-store openings.

How CFO Grade Assigns a Letter Grade

Every CFO Grade report assigns a letter grade from A+ to F based on a composite score across 24+ financial ratios, weighted by industry.