Any CEO’s vision is only as strong as the data behind it. While storytelling, culture, and inspiration matter, the true health of a business ultimately lives in its financials. Yet raw numbers alone rarely provide insight. It is the relationships between numbers—Key Performance Indicators (KPIs)—that reveal whether a company is efficient, solvent, and creating sustainable value.
Renowned financial expert Oana Labes distilled this complexity into a core set of 12 KPIs every CEO must understand and monitor. Together, these metrics form a navigational system that helps leaders distinguish between accounting success and economic reality—between paper profits and genuine value creation.
1. Foundation: Profitability and growth
These first KPIs evaluate the strength of the business model and its ability to scale.
Gross margin
Shows how much remains after production to cover overhead and profit. A declining gross margin is an early warning sign of rising costs or eroding pricing power.
Operating margin
Reveals whether operational decisions translate into real profitability after overhead. Strong operating margins indicate disciplined execution.
Revenue growth rate
Growth fuels valuation and relevance—but unmanaged growth can destroy cash. If revenue rises faster than cash generation, dependency on external funding increases. Growth must be profitable, not just fast.
2. Capital efficiency: Value creation
A company can report profits and still destroy value. These KPIs test whether capital is being used wisely.
Return on invested capital (ROIC)
Measures how efficiently the company converts invested capital into operating profit. If ROIC is below the cost of capital, the business is scaling losses.
Working capital as % of revenue
Indicates how much cash is locked into receivables, inventory, and operations for each dollar of sales. Rising percentages mean growth is becoming more expensive.
3. Reality check: Cash is king
Most companies fail from cash shortages—not from lack of profit. These KPIs expose whether earnings are turning into usable cash.
Cash conversion cycle (CCC)
Measures how many days cash is tied up in operations. Shorter cycles mean stronger liquidity.
Operating cash flow to sales
Tests revenue quality. Declining ratios signal slow collections, excess inventory, or weak customer payment behavior.
Free cash flow (FCF) margin
Cash remaining after operating expenses and capital expenditures. This is true financial freedom—funding dividends, acquisitions, and strategic investments.
EBITDA to operating cash flow
Compares “paper earnings” to real cash. Large gaps suggest aggressive accounting or earnings that do not translate into liquidity.
4. Solvency and risk management
Growth often requires leverage. These KPIs ensure debt remains controllable.
Current ratio – Ability to meet short-term obligations
Funded debt to EBITDA – Overall leverage relative to earnings
Debt service coverage ratio (DSCR) – Ability to pay interest and principal from operating income
DSCR is especially critical. Weak coverage restricts strategic flexibility and increases refinancing risk if markets tighten or interest rates rise.
Strategic synthesis
The power of these KPIs lies in pattern recognition.
- High revenue growth + Falling cash flow to sales → Low-quality growth
- Strong ROIC + High FCF margin → Green light for reinvestment
- Rising working capital % → Operational drag forming
Instead of reacting to crises, CEOs can intervene early—tightening collections, adjusting pricing, renegotiating supplier terms, or slowing expansion.
Conclusion
Data without context is noise. These 12 KPIs provide the context that turns financial data into strategic intelligence.
They bridge accounting and leadership.
They separate illusion from reality.
They anchor vision in economic truth.
A CEO who masters these metrics does not merely run a company—they orchestrate sustainable value creation.
DREIESKIVA|Roald Kvam 
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