Two Sides of Corporate Performance: Profitability Financial Ratios versus Sector-Specific KPIs

Financial ratios such as Return on Assets (ROA), Return on Sales (ROS), and Return on Equity (ROE) are widely employed to assess corporate financial performance, offering standardized metrics for cross-sector benchmarking and supporting strategic decision-making. However, these ratios, being broad and heavily reliant on financial accounting data, may not adequately capture performance at the operational, process, or activity level. Key Performance Indicators (KPIs) serve as a valuable complement to financial ratios by providing more detailed and context-specific insights. Unlike standardized financial ratios, KPIs are flexible and can be tailored to monitor business-critical areas and align with strategic objectives and Critical Success Factors (CSFs). As a result, they are commonly used as tools for performance monitoring and managerial control. In several industries—such as railways, insurance, airlines, retail, and telecommunications—sector-specific KPIs (e.g., cost per kilometer, load factor, or sales per square meter) have long played a pivotal role in driving operational efficiency and strategic alignment. This study investigates whether financial ratios and sector KPIs operate as complementary indicators of performance by analyzing a sample of large Italian companies in industries with established KPI traditions. Through an empirical analysis of ROA, ROS, and sector-specific KPIs for selected firms over the 2012–2013 period, the study identifies a strong correlation between KPI rankings and financial performance. Firms performing well in sector-specific KPIs also tend to exhibit superior financial ratios, suggesting that KPIs may serve as leading indicators of financial success in the medium term.