Financial Indicators: What They Are and How to Use Them in Managing Your Company

Jan 12
3 min read

In an increasingly competitive business environment, managing a company without financial indicators is like driving a car without a dashboard: it may seem like everything is working, but important signals go unnoticed… until it’s too late. Therefore, understanding and monitoring these indicators is essential for any entrepreneur who wants to make more accurate decisions and ensure the sustainability of their business.

Why Are Financial Indicators So Important?

Financial indicators act as a continuous diagnosis of the company.

Just like a car inspection shows what is working well and what needs attention, these indicators reveal trends and alerts that are not always visible from a superficial reading of the financial statements.

It is common for a company to show positive results on paper, yet be creating future problems due to rising costs, unstable sales, or poor cash management.

Indicators allow anticipation of these situations, understanding whether the business is growing, stagnating, or declining, and, above all, making decisions based on real data rather than perceptions.

Regardless of its size, a company that monitors its indicators manages better, reacts faster, and reduces risks.

EBITDA: What It Really Reveals About the Business

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is one of the most talked‑about indicators, and with good reason. Despite the complex name, it is simple in practice: it shows how much the company generates only from its main activity, before considering external elements such as taxes or financial costs.

It is, so to speak, a snapshot of the operational profitability of the business. This indicator helps identify situations where the company appears to have accounting profit but is losing money in daily operations.

Additionally, it allows comparison of performance between periods and between companies in the same industry.

In summary: EBITDA answers the essential question — is the core business truly profitable?

Profit Margin: One of the Most Direct Indicators

Profit margin indicates how much the company actually earns for every 100 escudos of sales. It is simple, but powerful.

A company can have high revenue and still earn little. Reduced margins may indicate increased costs, outdated prices, or inefficiencies in the process.

When the margin starts to fall, it is a warning sign. When it rises, it reveals better financial health, improved expense control, or higher valuation of the product or service.

In a small market like Cape Verde, operating with very low margins makes a company more vulnerable and hinders sustainable growth.

ROI: The Compass for Investment Decisions

ROI (Return on Investment) helps answer two fundamental questions before any investment:

Did the money come back?
And how long did it take?

Whether in purchasing equipment, opening a new store, or investing in marketing, ROI prevents impulsive decisions and allows calculating the real impact of each choice.

For example, if a company invests 50,000 escudos in a marketing campaign that brings no customers, ROI will help quickly identify the mistake and prevent repeating that investment.

It is an indispensable tool to minimise risks and guide decisions based on results.

Conclusion

Financial indicators are not just numbers — they are navigation tools for any company that wants to grow, improve efficiency, and anticipate problems.

EBITDA, profit margin, and ROI are three of the most relevant indicators, and when monitored regularly, they allow the entrepreneur to manage with clarity, rigor, and confidence.

In a dynamic economic context like that of Cape Verde, mastering these indicators can be the difference between a business that merely survives and a business that truly prospers.

This topic was discussed in detail in the latest episode of the “Economia Descomplicada” podcast.

Listen to the full episode here: