Lagging indicators are outputs that measure the performance of leading indicators (inputs). Thus, they are easier to measure but harder to get impacted compared to a leading indicator. In short, a leading indicator has the power to influence change, but a lagging indicator can only record what has happened already.
Key elements of a leading indicator
This makes them much easier to measure but impossible to change because they are measures of events that have already taken place.
Decision-makers may ask:
- How much product was produced?
- How many people attended the event?
- What response did the product receive?
With these answers, lagging indicators give decision-makers insight into what has occurred and what could be done differently in the future. A lagging indicator may measure profit, revenue, customer participation, or expenses.
Connected Financial Concepts
- Accounting Equation
- Financial Statements In A Nutshell
- Cash Flow Statement In A Nutshell
- How To Read A Balance Sheet Like An Expert
- Income Statement In A Nutshell
- What is a Moat?
- Gross Margin In A Nutshell
- Profit Margin In A Nutshell
Main Free Guides: