Reading Graphs Pt4: Cost Breakdown, ROE %, ROA %, and Creditor Days

The Deep Dive: Spotting Smart Management (and Bad Payers)

In the final part of our dashboard guide, we are looking at the "Management Metrics."

Anyone can grow revenue by spending a fortune. But can they generate a return on that spending? And do they treat their suppliers fairly? These four charts peel back the layers of the P&L to show you the quality of the decisions being made at the top.

Here is how to interpret the final set of charts on the Reportly dashboard.

1. Cost Breakdown (The P&L Stack)

• What is it? This chart stacks up all the costs to show you exactly where the revenue goes.

  • Pink (Cost of Sales): Direct costs to make the product.

  • Yellow (Admin Expenses): Overheads like rent, marketing, and management salaries.

  • Purple (Net Profit): What is left over (or the loss, if it hangs below the line).

• How to read the chart

  • The "Fat": Look at the yellow bars (Admin Expenses). If these are growing faster than the total height of the bar (Revenue), the company is becoming bloated with overheads.

  • The Bottom Line: In the example chart, notice how the purple bar (Profit) dips below the zero line in 2022/2023. This visualises a period where costs ate up every penny of revenue.

• How to use this information

  • For Job Seekers: If you see "Admin Expenses" being cut (the yellow bar shrinking), it usually means redundancies or office downsizings are happening.

2. ROE % (Return on Equity)

• What is it? Return on Equity measures how much profit the company generates for every pound invested by shareholders. It is the ultimate measure of efficiency for the owners.

• How to read the chart

  • The Trend: You want to see a high, steady positive number.

  • The Volatility: In the example chart, ROE swings wildly from negative to +150%. This suggests a company that is either highly leveraged (using debt to boost returns) or has very unstable earnings.

• How to use this information

  • For Investors: This is your primary metric. A high ROE means the company is a "wealth compounder."

  • For Employees: High ROE companies are efficient. They don't need to constantly raise funds to survive, which makes them more stable employers.

3. ROA % (Return on Assets)

• What is it? Return on Assets answers a simple question: "How good is this company at using the stuff it owns to make money?" It looks at profit relative to total assets (cash, equipment, intellectual property).

• How to read the chart

  • The Comparison: Asset-light companies (like software firms) should have very high ROA. Asset-heavy companies (like factories) will have lower ROA.

  • The Warning: If ROA is negative (as seen in 2021 on the chart), the company’s assets are effectively "lazy"—they are costing money rather than making it.

• How to use this information

  • For Observers: This separates the "hype" from the "reality." A company might have a cool office and lots of equipment, but if their ROA is low, they aren't using those assets effectively.

4. Creditor Days

• What is it? This measures the average number of days the company takes to pay its suppliers (creditors). It is a measure of "payment culture."

• How to read the chart

  • The Number: In the UK, standard payment terms are often 30 days.

  • The Red Flag: Look at the chart—this company consistently takes 100 to 150 days to pay its bills. That is 3 to 5 months of delay.

• How to use this information

  • For Suppliers/Freelancers: DO NOT IGNORE THIS CHART. If you are about to sign a contract with a company that has 150 Creditor Days, know that you will be waiting months for your money. You must negotiate better payment terms upfront or ask for a deposit.

  • For Job Seekers: Companies that delay paying suppliers are often managing a cash flow problem. If they struggle to pay vendors, payroll could be next.

Want to test your new skills? Check out our full example dashboards here.