Financial Ratios
Understanding Financial Ratios for Small Business Owners
An essential guide to leveraging financial ratios to enhance business performance and decision-making capabilities.
What Are Financial Ratios?
Financial ratios are crucial metrics derived from your business's financial statements to evaluate its efficiency, liquidity, profitability, and solvency.
Liquidity Ratios
These ratios measure the ability of your business to cover short-term obligations. Key ratios include the Current Ratio and Quick Ratio.
Profitability Ratios
Assess the ability of your business to generate earnings relative to sales, assets, and equity. Includes Gross Profit Margin and Net Profit Margin.
Efficiency Ratios
Evaluate how effectively your business uses its assets to generate income. Includes ratios such as Inventory Turnover and Accounts Receivable Turnover.
Solvency Ratios
These ratios, including the Debt to Equity Ratio and Interest Coverage Ratio, measure your business's capacity to meet long-term obligations.
Customizing Financial Ratio Analysis to Your Business
Know Your Numbers Accounting PLLC offers personalized guidance to utilize financial ratios effectively, helping you achieve business success and financial stability.