Benchmarking — or comparing a company’s financials to those of industry peers and its own historical performance — can provide insight into future cash flows and operating risks. Business valuation professionals use the following types of benchmarks to assess company-specific risk and, in turn, a subject company’s expected return. Profitability Profitability metrics evaluate how much money the subject company earns from each dollar in revenue. For-profit companies need to earn enough to cover fixed and variable costs, but some may accept a loss on certain products to gain market share or lure customers. Common profitability metrics include: Gross margin [(revenue - costs of sales) / revenue], and EBITDA margin (earnings before interest, taxes, depreciation and amortization / revenue). Profit margin (net income / revenue) may be less relevant when...