In performance measurement, which of the following is an example of a leading indicator of financial performance?

• A. Customer satisfaction
• B. Net income
• C. Debt-to-equity ratio
• D. Dividend yield

Answer: (A)

Leading indicators are metrics that give early signals about future financial performance. Customer satisfaction is a non-financial measure that often forecasts future revenue and profitability because satisfied customers are more likely to buy again, stay loyal, and refer others. This makes it a predictor of how financial results might improve in the future. Net income, by contrast, is a result of activities in the past period and reflects what happened, not what will happen, so it’s a lagging indicator. The debt-to-equity ratio shows how a company is financed and its financial risk rather than signaling upcoming performance. Dividend yield reflects current payout policy rather than future profitability.