Chart of accounts
The list of accounts every transaction is posted to, grouped into assets, liabilities, equity, income and expenses.
What is a chart of accounts?Finance metrics
Finance metrics and accounting basics
The profitability and performance measures every business owner and finance team should understand, how to calculate them, and the accounting foundations that make them reliable.
Why a handful of numbers matter so much
Lenders, investors, boards and buyers ask the same questions of every business: how much do you keep from each sale, is the business profitable after its overheads, and how much do you need to sell to cover your costs. Gross margin, net margin, EBITDA and break-even answer those questions in a form everyone recognises.
The formulas are simple. The hard part is having figures you trust. That depends on a sensible chart of accounts, costs posted to the right places and a disciplined month-end close, so the numbers behind each metric are complete and consistent from one month to the next.
Metrics
Key finance metrics and how to calculate them
Five measures that come up in almost every board meeting, funding conversation and pricing decision.
- Profitability
Gross profit margin
(Revenue - cost of sales) ÷ revenue × 100
How much of each pound of sales is left after the direct cost of what you sold. A falling gross margin points to pricing or supplier costs.
The gross profit margin formula - Profitability
Net profit margin
Net profit ÷ revenue × 100
How much of each pound of sales is left after every cost, including overheads, interest and tax. The clearest single view of whether the business makes money.
Why net margin matters - Performance
EBITDA
Net profit + interest + tax + depreciation + amortisation
Earnings before interest, tax, depreciation and amortisation. Used to compare operating performance between businesses with different debt and assets.
What EBITDA means - Planning
Break-even point
Fixed costs ÷ (price per unit - variable cost per unit)
The number of units you need to sell to cover your costs. Useful when setting prices, taking on new overheads or launching a product.
The break-even point formula - Investment
Dividend yield
Annual dividend per share ÷ share price × 100
The return a shareholder receives in dividends relative to the share price. Relevant to shareholders and to businesses planning distributions.
What dividend yield tells you
Accounting basics
The accounting behind the numbers
Every metric is only as reliable as the ledger it comes from. These are the foundations worth getting right.
General ledger
The master record of every transaction, and the source of the profit and loss account and balance sheet.
What is a general ledger?Dimensions and posting groups
Tags such as department, project or region that let you report margins without adding hundreds of accounts.
A chart of accounts that scalesMonth-end close
Reconciling, accruing and reviewing each month so the figures behind every metric can be trusted.
The month-end close processArticles
More on finance metrics and accounting basics
Our articles on profitability measures, accounting basics and running a finance team, grouped by topic.
Profitability and performance metrics
What gross margin, net margin, EBITDA, break-even and dividend yield measure, how to work them out and what they tell you about the business.
2 April 2026What is the gross profit margin formula?Read the article 
21 April 2026Why net margin is the crucial indicator of business healthRead the article 
27 March 2026How to improve your net marginRead the article 
10 April 2026What is the meaning of EBITDA?Read the article 
12 March 2026What is the break-even point formula?Read the article 
16 February 2026What Is a Dividend Yield and Why Does It Matter?Read the article
Accounting basics
How a chart of accounts is structured and what a young business should get right in its accounting from the start.
Running a finance team
Choosing the right technology for the finance team, communicating clearly with the rest of the business and keeping financial data secure.
Next steps
From metrics to better reporting
Where to go once you know which numbers matter.
Finance processes guide
How purchase to pay, order to cash, the ledger, close and reporting fit together.
Find out more about Finance processes guideFinancial reporting software guide
Turning ledger data into management accounts, dashboards and board packs.
Find out more about Financial reporting software guideReports and dashboards
Margin, profitability and cash reporting in Microsoft Dynamics 365 and Power BI.
Find out more about Reports and dashboardsMicrosoft Dynamics 365 Business Central
Finance, sales, purchasing and stock in one system, so metrics come from live data.
Find out more about Microsoft Dynamics 365 Business CentralEnquiry form
Want margins and profitability you can trust?
Tell us how you report on margins and profitability today, and we'll show you how Microsoft Dynamics 365 Business Central could produce them from live data.
FAQ
Frequently asked questions
Gross margin shows what is left from revenue after the direct cost of the goods or services sold. Net margin shows what is left after every cost, including overheads, interest and tax. Gross margin tells you whether what you sell is priced well; net margin tells you whether the business as a whole is profitable.
EBITDA strips out interest, tax, depreciation and amortisation, so it shows operating performance before financing and accounting decisions. That makes it easier to compare businesses with different debt levels or asset bases, but it is not the same as cash and should be read alongside cash flow.
Divide fixed costs by the contribution each unit makes, which is the selling price minus the variable cost per unit. The answer is the number of units you need to sell to cover your costs. Multiply it by the selling price to get break-even revenue.
A chart of accounts is the list of every account a business records transactions in, grouped into assets, liabilities, equity, income and expenses. It is the structure of the general ledger, so a well-designed chart makes every report easier to produce.
Start with gross margin, net margin, cash position and debtor days. Add break-even once you are planning prices or new costs, and EBITDA if you are raising finance or preparing to sell. The right set depends on what decisions the numbers need to support.
Yes. When sales, costs and overheads are posted to a well-structured chart of accounts, an ERP such as Microsoft Dynamics 365 Business Central can report margins and profitability by product, customer, department or project without rebuilding spreadsheets each month.