# Metric Definitions

Definitions derived from OpenReference™ metrics where available.

### Operating Margin

Operating Margin measures how much a company makes or loses from its primary business per dollar of sales. Operating Margin compares Operating Income to total sales revenue. ${Operating\ Margin} = \frac{Operating\ Income}{Revenue} * 100\%$
Unit of measure: %
A higher percentage indicates a better performance.

### Distribution Costs

Distribution Costs measures a company’s expenses related to the delivery of products and services to the customer. Example costs include: Transportation costs, warehousing costs, handling costs, import/export duties, labor costs, depreciation/amortization and other costs. Distribution Cost Ratio compares Distribution Costs to total sales revenue. ${Distribution\ Cost\ Ratio} = {Distribution\ Costs\over Revenue} * 100\%$
Unit of measure: %
A lower percentage indicates a better performance.

### SG&A Expenses

Selling, General and Administrative expense measures a company’s general and administrative expenses, and the sum of all indirect and direct selling expenses. This may including Distribution Costs for companies not reporting according to IFRS standards. ${SG\&A\ Ratio} = \frac{SG\&A\ Expenses}{Revenue} * 100\%$
Unit of measure: %
A lower percentage indicates a better performance.

### Cost of Goods Sold

Cost of Goods Sold measures the expense a company incurred in order to manufacture, create, or sell a product. It includes the purchase price of the raw material as well as the expenses of turning it into a product. ${Cost\ of\ Goods\ Sold} = \frac{{Direct\ Materials} + {Direct\ Labor} + {Overhead}}{Revenue}* 100\%$
Unit of measure: %
A lower number of days indicate a better cost to source and make products/services sold. . Alternative names include: Cost of Revenue and Cost of Sales.

### Cash Conversion Cycle

The Cash Conversion Cycle measures the average period it takes a company to acquire and sell Inventory, collect Receivables and pay Payables, demonstrating the efficiency with which cash flows through the business. ${Cash\ Conversion\ Cycle} = {Days\ Receivables\ Outstanding + Days\ Of\ Inventory - Days\ Payables\ Outstanding}$
Unit of measure: Days (calendar days)
A lower number of days indicate a better use of working capital.

### Days Receivables Outstanding

Days Receivables Outstanding measures the number of days it takes a company to collect cash generated from sales. This is generally the average number of days between invoicing a customer and collecting payment. ${Days\ Receivables\ Outstanding}=\frac{Average\ Receivables}{Revenue}* 365\ days$
Unit of measure: Days (calendar days)
A lower number of days indicates a better use of working capital.

### Days of Inventory

Days of Inventory measures the number of days worth of Inventory the company holds on its books. ${Days\ of\ Inventory}=\frac{Average\ Inventory}{Cost\ of\ Goods\ Sold}* 365\ days$
Unit of measure: Days (calendar days)
A lower number of days indicates a better use of working capital.

### Days Payables Outstanding

Days Payables Outstanding measures the average number of days the company takes to pay its invoices. ${Days\ Payables\ Outstanding}=\frac{Average\ Payables}{Cost\ of\ Goods\ Sold}* 365\ days$
Unit of measure: Days (calendar days)
A higher number of days indicates a better use of working capital.

### Fixed Asset Turns

The Fixed Asset Turns is a ratio that measures a company’s ability to generate net sales from the investments made in Fixed Assets. Example fixed assets include Property, Plant and Equipment (PP&E), net of depreciation. ${Fixed\ Asset\ Turns}=\frac{Revenue}{Fixed\ Asset\ Value}$
Unit of measure: Turns
A higher number indicates a better use of company assets.