KPI Glossary

Current Ratio reflects on an organization’s ability to pay all the financial obligations in one year. This financial KPI takes into account a company’s current assets such as account receivables, and current liabilities, such as account payables.

A Current Ratio of less than one indicates that your child care business will not be able to meet all of its financial obligation without an increase in cash flow.

A healthy Current Ratio is between 1.5 and 3. During time periods where you might be investing in your child care business for growth or incurring debt to grow, your Current Ratio might drop below 1.

Child care buyers like to use the Current Ratio as an indicator of whether a company has a healthy operation on a continual basis.  A Current Ratio below 1 indicates the business is not generating enough cash to meet financial obligations.  And, a high Current Ratio often is not good either as it often indicates a child care business has a lot of cash and assets, which are not being appropriated invested in growth and innovation.

This metric shows how efficient is a company at generating profit compared to its revenue. Frequently calculated as a percentage, this KPI indicates how much of each dollar earned by the company translates into profits.

The Net Profit Margin reflects on the profitability of a business and shows how fast the company can grow in the long-term prospect.

Net margin = net profit / revenue

The Gross Profit Margin measures the proportion of money left over from revenue after accounting for the cost of goods sold. This metric is a great indicator of a company’s financial health, indicating whether a business is capable of paying its operating expenses while having funds left for growth.

Most businesses, including child care businesses, have a relatively stable Gross Profit Margin figure, unless they’ve done some drastic changes affecting the cost or goods or the tuition rates charged (gross revenues).

Calculated as: costs of goods sold / revenue