You just closed Q3 for a mid-sized agricultural processing company and the CFO asks you to explain whether the business actually performed worse or whether the headline concern is being driven by working capital and capital intensity. Revenue grew year over year, but operating income and cash generation moved in different directions, and management wants a concise view of financial performance using the core operating KPIs. Assume USD reporting and use quarter-end balances to approximate invested capital.
| Metric | Q3 Current Year | Q3 Prior Year |
|---|---|---|
| Revenue | $2,400,000,000 | $2,200,000,000 |
| Gross profit | $288,000,000 | $286,000,000 |
| SG&A | $132,000,000 | $121,000,000 |
| Depreciation & amortization | $36,000,000 | $34,000,000 |
| Accounts receivable | $410,000,000 | $360,000,000 |
| Inventory | $690,000,000 | $610,000,000 |
| Accounts payable | $520,000,000 | $500,000,000 |
| Net PP&E | $1,180,000,000 | $1,050,000,000 |
How would you evaluate the company’s financial performance across profitability, working capital efficiency, and capital efficiency, and what would you tell management is driving the change versus the prior year?
KPI selection for financial performance evaluationDiagnosis of margin versus balance-sheet driversUse of leading indicators such as working capital intensityAbility to connect operating profit to capital efficiency