Читать книгу Financial Management 101 - Angie Mohr - Страница 7

In this chapter, you will learn —

• Why ratio analysis is critical to successful businesses

• The basic ratios and what they tell you

• How to pick the ratios that best foretell your business’s success

• What to do when ratios indicate a problem

• How to integrate ratios into your management reporting system

The subject of ratios is one that makes most small business owners’ heads hurt. Financial analysts and stockbrokers regularly assess the ratios of large, publicly traded companies, but many small businesses do not even consider ratios when they prepare their financial information. Why should you care about ratios? Consider the following reasons:

• Your bank will certainly care about monitoring ratios. They want to see how you’re doing in comparison with other businesses that they are lending to, and in comparison to the standards they have set for lending.

• Ratios are excellent indicators of financial health. Much like a high blood pressure or cholesterol reading at your doctor’s office would signal impending physical trouble, out-of-kilter ratios signal financial trouble for your business.

• Ratios are a useful tool for comparing your business activities year over year. For example, is your working capital ratio steadily improving or not? (We will discuss this and other ratios later in the chapter.)

• Ratios are a useful tool for comparing your business activities with those of other businesses. Without using ratios, it can be difficult to compare businesses of different sizes.