1. Gross profit subtracts variable costs from revenue for each product line.

2. Operating profit includes both variable and fixed costs. Since it doesn't include certain financial costs, it's also commonly called EBITA. That stands for Earnings Before Interest, Tax, Depreciation, and Amortization. It's the most commonly used, especially for service companies that don't have products.

3. Net profit includes all costs.It's the most accurate representation of how much money the business is making. On the other hand, it may be misleading.For example, if the company generates a lot of cash, and it's invested in a rising stock market, it may look like it's doing well. But it might just have a good finance department, and not be making money on its core products.

From a shareholder perspective, return on equity (ROE)* is the main summary measure of a firm’s financial performance

• ROE is important because it a critical proof that the company is capable of generating cash internally. ROE=net income/average shareholder equity

Free cash flow is the cash a company produces through its operations, less the cost of expenditures on assets. In other words, free cash flow— or FCF—is the cash left over after a company pays for its operating expenses and capital expenditures, also known as CAPEX.

Net income+depreciation/amortization-change in working capital-capital expenditure=free cash flow

ROA – Return on assets - can be written as the product of two ratios – profit margin and asset turnover

ROA=earnings before interest/sales revenue(profit margin)=sales revenue/total assets(asset turnover)

Working capital is the amount of current assets minus the amount of current liabilities as of specific date. These amounts are obtained from your company's balance sheet.Even with a significant amount of working capital, a company can experience a cash shortage if its current assets are not turning to cash. For example, if a company has most of its current assets in the form of inventory, that inventory needs to be sold.

returns on capital employed=net operating income/total assets-current liabilities

The opportunity to increase shareholder value in the future will have to take care of both the income statement and balance sheet through supply chain excellence.

The net income figure is arguably the most focused-upon performance metric in the business community.

earnings before interest and taxes (gross margin minus administrative overhead costs),

EBITDA (earnings before interest and taxes minus depreciations and amortization expense).

Supply chain decisions and performance have direct impacts on income through each of the three primary components of the income statement

Within the balance sheet, a key component of organizational success (or failure) is the control of working capital.

Working capital is defined as current assets less current liabilities; think of working capital as the "lifeblood" of an organization, as it is essential to keeping the organization healthy and viable.

The primary components of current assets are cash (and cash-like investments), accounts receivables, and inventories;

The primary component of current liabilities for most firms is accounts payables.

Holding costs – financing, warehousing, tracking, moving, insurance

number of days of inventory=inventory/average day's cost of goods sold=inventory/cost of goods sold/365

capital employed=inventory+accounts receivable+cash+fixed assets(asset deployment&utilization)

net sales-operating expenses=operating profit(EBIT)-tax on EBIT=NOPAT-capital charges(invested capital*WACC)=EP or EVA

Increase ROI*return on investment = (revenue − cost of goods sold) / cost of goods sold

COGS management and strong financial and analytic perpective