Key performance indicators – an
appropriate way to perceive MOEs
AD 3, principal auditor Julius Lukošius
2016-09-21
Key Performance Indicator (KPI)
Is measurable value that demonstrates how effectively a
company is achieving key business objectives.
KPIs
Help to assess the viability, stability and profitability
of a business
Say little about the firm's prospects in an absolute
sense.
The challenges we faced
MOEs work in various different fields and unique market structures
What do we measure?
How do we make the comparisons?
Solution - being SMART about analysis
Sector-based analysis
Ability to Measure changes
Include All MOEs
Relevant to the municipality
Time-frame long enough to see the
trends
KPIs we chose to measure
in our audit
Gross profit margin
Profit and loss
statement
 How much profit falls for 1 euro
of net sales.
 Describes the subject's core
business profitability.
 Indicates whether it’s worth to
provide services (sell goods).
Generally, compared
to margins of other
similar companies or
previous periods
margins.
Operating Margin
Profit and loss
statement
 How much of operating profit earns 1 euro of sales.
Y = operating profit – gross profit
Y represents the cost of the
administrative activities per 1 euro
of sales.
Profit margin
Profit and loss
statement
• Profit margin is an indicator of a
company's pricing strategies and
how well it controls costs.
• The profit margin is used mostly
for internal comparison. It is
difficult to accurately compare
the net profit ratio for different
entities
> 10 – good
< 10 - unsatisfactory
5 and less bad
Return On Equity (ROE)
Profit and loss statement
Statement of financial
position (Balance sheet)
15 % is generally considered good
• A measure of the profitability of
> 10 – good
a business in relation to the book
value of shareholder equity
< 10 - unsatisfactory
• ROE is a measure of how well a
company uses investments to
The company is working inefficiently.
Competition in the market is particularly strong
generate earnings growth
The market cycle is the falling stage.
The company's capital structure is not effective.
Return On Assets (ROA)
Profit and loss
statement
• How many euros of earnings
they derive from each euros of
assets they control.
• A useful number for comparing
competing companies in the
same industry.
> 15 – good
< 8 – unsatisfactory
Debt ratio
Statement of
financial position
(Balance sheet)
 Indicates the percentage of
a company's assets that are
provided via debt.
 The higher the ratio, the
greater risk will be
associated with the firm's
operation
> 0,7 – unsatisfactory
< 0,5 – good
Thank you!