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CMA Final · Entrepreneurship and Startup · Types of New Age Business

A Bengaluru firm sells a software tool to businesses on a monthly fee, with customers able to cancel at any time. Which metric is most directly used to judge the predictability of its revenue stream?

Monthly recurring revenue is the most direct metric. A subscription software business earns repeating monthly fees, so MRR shows the predictable revenue base and how it grows or shrinks with customer churn. Inventory turnover, fixed asset base and dividend payout do not measure subscription revenue predictability.

  1. AMonthly recurring revenue (MRR)Correct
  2. BGross block of fixed assets
  3. CDividend payout ratio
  4. DInventory turnover ratio

Explanation

Subscription (SaaS) businesses earn fees at regular intervals, so MRR captures the predictable revenue base and its growth or churn. Inventory turnover and gross block relate to physical goods and assets, and the dividend payout ratio is a shareholder distribution measure, not a revenue-predictability metric.

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