We all know a few simple methods of testing our personal health and well-being but how about the health of your business?
Let us introduce you to some Financial Ratios, don't worry about the technical talk, we always make it easy to understand.
A Financial Ratio is just a simple way to assess the relationship between two items selected from the Profit and Loss or the Balance Sheet.
It helps you evaluate the weak and strong points in your financial and managerial performance.
Generally, Financial Ratios are calculated for the purpose of evaluating aspects of a company's operations and fall into the following categories:
- liquidity ratios measure a firm's ability to meet its current obligations
- profitability ratios measure management's ability to control expenses and to earn a return on the resources committed to the business
- leverage ratios measure the degree of protection of suppliers of long-term funds and can also aid in judging a firm's ability to raise additional debt and its capacity to pay its liabilities on time
- efficiency, activity or turnover ratios provide information about management's ability to control expenses and to earn a return on the resources committed to the business
Let us run your business over our treadmill to assess a few basic measures:
- acid test
- current ratio
- quick ratio
- debt to equity ratio
- average days to collect
- sales to assets ratio
- profit to sales ratio
Sometimes a trip to the doctor can give you early enough warning to fix a problem.
Call us on 0415 483 488 or email to arrange your business' health check.