Overview
The KPIs page in RunSmart displays a collection of key performance indicators (KPIs) that help you evaluate your business’s financial health and future outlook. These charts turn complex numbers into visual trends, making it easier to spot what’s going well and where you might need to make changes. Understanding these metrics can help you make smarter decisions—without needing a finance degree.
📊 1. Margins
What it shows:
Margins tell you how much profit you keep after paying your expenses. For example, if you earn $1 and have a 20% margin, you keep 20 cents in profit.
Why it matters:
Margins show how efficiently your business turns sales into profit. High margins mean you’re keeping more of what you earn. Low margins could mean your costs are too high or your pricing is too low. More sales don't always mean more profit—if your costs rise faster than revenue, your bottom line can suffer. Margins help catch this early.
What to watch for in the chart:
📈 Upward trend: You’re managing costs well or charging enough for your products/services
📉 Downward trend: Your costs might be creeping up or you’re discounting too much
Pro tip:
Compare with LTM Net Income Growth. If both are rising, your profits are growing in a healthy way. If margins drop while income is flat, it may be time to adjust pricing or reduce unnecessary spending.
💼 2. Equity Book Value
What it shows:
This is your business’s net worth—what would be left for the owner(s) if everything was sold and debts were paid.
Why it matters:
It’s a good indicator of long-term financial health. A rising number means your business is gaining value. A falling number could mean losses or rising debt. Think of it like your business’s savings account—it should grow steadily over time.
What to watch for in the chart:
📈 Rising equity: You’re growing assets or paying off debt
📉 Falling equity: You may be losing money or relying more on borrowed funds
🚨 Negative equity: This means your business owes more than it owns. In other words, if you liquidated everything today, you'd still be in the red.
Common causes include:
Ongoing losses that eat into retained earnings
Heavy borrowing with few offsetting assets
Write-downs of assets that lost value (e.g., obsolete inventory or equipment)
It’s a red flag—especially if sustained over multiple periods—and may affect your ability to borrow, attract investors, or sell the business later.
🔥 Consequences of Negative Equity:
If your equity book value is negative, it’s a strong signal of financial distress. Here's what it means in practice:
Your business has likely accumulated significant losses over time, or is carrying too much debt.
You have no “owner value” left in the business—if you shut down today, you'd still owe money.
Lenders and investors see this as high risk—it may be harder (or more expensive) to secure loans or raise funding.
In some cases, especially for corporations, negative equity can lead to bankruptcy or dissolution if obligations can’t be met.
⚠️ Common causes of negative equity:
Long periods of operating at a loss
Large loans without enough assets to offset them
Asset write-downs (e.g., obsolete inventory or equipment no longer holding value)
Excessive owner withdrawals or dividends exceeding profits
Pro tip:
Track your equity trend alongside Debt to Capitalization. If equity is negative and debt is rising, your business may be over-leveraged. In this case, focus on restoring profitability, preserving cash, and avoiding further liabilities until equity returns to positive territory.
💳 3. Debt to Capitalization
What it shows:
This tells you what percent of your business is financed by debt. For example, if this is 40%, then 40% of your business is funded by loans and 60% by owner equity.
Why it matters:
Too much debt can be risky and expensive due to interest. A lower percentage means you’re less reliant on borrowing. Debt can be useful, but only if it’s helping your business grow in a way that pays off more than it costs.
What to watch for in the chart:
📉 Decreasing ratio: You’re paying down debt or increasing equity—a good sign
📈 Increasing ratio: You’re taking on more debt, which could raise risk
Pro tip:
Pair with Interest Coverage Ratio. If your debt is rising but you’re still able to comfortably cover interest, you're okay. If not, it’s a red flag.
💰 4. Interest Coverage Ratio
What it shows:
How many times you can pay your interest expenses with your operating income. For example, a ratio of 5 means you earn 5 times what you need to pay in interest.
Why it matters:
This shows how comfortably your business can cover loan interest. Higher is better. If this number gets too low, lenders may be hesitant to extend more credit, or they may charge you higher interest rates.
What to watch for in the chart:
📈 Higher ratio: You have plenty of income to handle debt payments
📉 Lower ratio: Interest costs may be eating into your profits
🚨 Negative ratio: This means your business is operating at a loss (negative EBIT), and you don’t have enough earnings to cover interest payments at all. (EBIT = Earnings Before Interest and Taxes).
Example: If EBIT is –$40,000 and interest expense is $10,000, your interest coverage ratio is –4. That means you’re not just falling short—you’re operating at a loss before covering any interest obligations.
🔥 Consequences of a Negative Interest Coverage Ratio:
If your interest coverage ratio is negative, it’s a serious financial red flag. Here’s why:
You are not generating enough operating income to service your debt.
You’re likely relying on cash reserves, new borrowing, or outside capital just to pay interest.
Lenders may refuse to extend more credit, reduce your credit limit, or raise your interest rates.
Your business may face higher risk of default, especially if reserves run out.
It can damage investor confidence, making it harder to raise funds.
Pro tip:
Use this alongside Net Debt/EBITDA to get the full picture of your debt health.
🧾 5. Net Debt/EBITDA
What it shows:
This shows how many years it would take to pay off your debts using your earnings before interest, taxes, depreciation, and amortization (EBITDA).
Why it matters:
Lower is better—it means you could pay off debt faster with your current income. If this number is climbing, it’s a sign to check whether your debt is growing faster than your income.
What to watch for in the chart:
📉 Falling ratio: You’re paying off debt or earning more
📈 Rising ratio: You may be taking on more debt or your earnings are falling
Pro tip:
Use with Interest Coverage Ratio to assess whether your debt is sustainable.
📈 6. LTM Sales Growth
What it shows:
This shows how much your sales have grown over the last 12 months (LTM) compared to the previous 12-month period. For example, if your business generated $100,000 in sales over the prior 12 months and $110,000 in the most recent 12 months, that’s 10% growth.
How it’s calculated:
(Total sales from the last 12 months ÷ Total sales from the previous 12 months) − 1
Why it matters:
This helps you understand whether your business is actually growing based on real performance—not projections. Rising sales indicate increasing demand, while flat or declining sales may point to issues with pricing, competition, or customer acquisition.
What to watch for in the chart:
📈 Sales increasing: Your business is growing based on actual results
📉 Flat/declining: May signal a need to adjust your strategy or offerings
Pro tip:
Compare with LTM Net Operating Income Growth. If sales are growing but income isn’t, your costs may be rising too quickly.
📊 7. LTM Net Operating Income Growth
What it shows:
This shows how your operating profit (before interest and taxes) has changed over the last 12 months compared to the prior 12 months.
Why it matters:
It helps you evaluate whether your core business operations are becoming more efficient over time. Unlike sales alone, this accounts for how well you’re managing costs.
What to watch for in the chart:
📈 Upward trend: Improving efficiency and profitability
📉 Downward trend: Costs may be increasing faster than revenue
Pro tip:
Use this alongside Margins and LTM Sales Growth to confirm that growth is both real and sustainable.
💵 8. LTM Net Income Growth
What it shows:
This shows how your total profit (after all expenses, interest, and taxes) has changed over the last 12 months compared to the previous 12 months.
Why it matters:
It provides a clear, bottom-line view of whether your business is becoming more profitable over time based on actual results.
What to watch for in the chart:
📈 Rising net income: Your business is becoming more profitable
📉 Falling net income: Could indicate rising costs, declining sales, or other financial pressure
Pro tip:
Compare with Margins and Operating Income. If net income is improving but others aren’t, the change may be driven by one-time factors rather than core performance.
Final Thoughts
Each KPI gives you one piece of the puzzle. Together, they help you understand where your business stands and where it’s going. Keep an eye on trends over time—not just individual numbers—and always use more than one chart to get the full picture. With these tools, you can make confident decisions and grow your business wisely.