Calculation for the year-over-year growth rates of key metrics (sales, assets, equity, earnings and sustainability). Growth rates are used to evaluate a firm's performance in several key areas: 1) against its competitors, 2) its own performance relative to the overall economic environment, 3) its growth in terms of business growth curve (fast growing startup versus mature growth firm) and 4) to assist in the development of valuation models.

A firm's ability to generate a good profit and return on investment is indicative of managements' ability to efficienctly and productively employ capital (assets and equity) in the operations of the firm. These measures are used to judge the firm's independent performance and to compare its performance in relation to competitors.

The DuPont Return on Equity model disaggregates the ROE equation into interrelated value drivers or levers that are used to gain greater insight into how a firm generates its profitability. Net Profit Margin measures the amount of net income generated per dollar of sales. Asset Turnover measures the amount of sales generated per dollar of assets. Total Leverage measures the amount of assets that can be supported by a dollar of common equity. Net Profit Margin and Asset Turnover relate to the operational efficiency of the firm. Total Leverage relates to the capital structure of the firm and can vary greatly depending on the industry in which the firm competes.

Profit Margins measure the profitability of the firm at different stages on its Income Statement based on the firm's operational cost structure. These measures are an indicator of the financial well-being and efficiency with which the firm is being managed. These ratios are useful in comparative analysis with competitor firms and in assessing the relation between a firm's sales and profits as the margins progress from Gross Margin to EBIT Margin on the Income Statement.

Liquidity relates to a firm's ability to pay its maturing short-term debt. Poor liquidity ratios may increase a firm's cost of financing and may render it incapable to pay bills and other short-term obligations (ratios near one or less). Too much liquidity is possibly indicative that the firm has too much cash and may be earning a low rate of return.

Asset turnover ratios reflect the manner in which assets are utilized to generate revenues and profits. Higher asset ratios relate to higher efficiency and productivity from the assets. Asset turnover ratios are converted into operating periods by dividing 365 (calendar days in a year) by the turnover ratio. The operating periods (in days) reflect the average time required to convert inventory into sales (Average Inventory Period) and sales into cash (Average Collection Period). Two additional periods derived from these periods are: 1) Operating Cycle = Average Inventory Period + Average Collection Period and 2) Cash Cycle = Operating Cycle - Average Payment Period.

Solvency relates to a firm's ability to satisfy its maturing long-term debt and other obligations. A firm capable of generating earnings in excess of its interest costs and other long-term obligations is considered solvent. If a firm is not capable of meeting its financial obligations, then it can be considered in default of its loan terms and forced to file bankruptcy due to insolvency. Capital structure plays an important role since highly leveraged firms can become more vulnerable during poor economic periods when sales stagnant or decline and interest/debt costs erode profitability.