A recent article over on CPO Agenda on Skills for the Future that summarized the findings from a recent workshop that debated the skills the future would require identified better finance skills as keys to future purchasing success. Since the article simply rambled off a list of terms with no definition, I decided I’d define the basics for you.

**Asset Turnover**: is the amount of sales generated for every dollar worth of assets. Simply put, it is `revenue divided by assets`

. It measures an organizations efficiency at using assets to generate revenue. The higher, the better. It can also indicate pricing strategy. A company with a low profit margin tends to have high asset turnover, while those with high profit margins tend to have low asset turnover.

**Return On Investment**: (ROI) is a performance measure used to evaluate the efficiency of an investment. It is calculated as `the return on investment divided by the cost of the investment`

. The higher the ROI, the better the investment.

**Return on Invested Capital**: (ROIC) is a performance measure used to assess the company’s efficiency at allocating the capital under its control to profitable investments. It is calculated as `the Net Return for all Investments divided by the Total Capital available`

. (Where Net Return is Net Income minus Dividends).

**Profit Margin**: net margin, net profit margin, or net profit ratio is a measure of profitability that is equal to the `net profit (after taxes) divided by revenue`

. Like Asset Turnover, ROI, and ROIC, bigger is better.