When you’re running your own business, it’s easy to fall into the trap of thinking you have to be expert at everything. And when you’re an experienced business owner, it can be hard to admit there are key financial concepts that you’d really like someone to go over again in plain English. The MYOB Australian Business Survey 2004 identified that many SMEs desired advice from their accountants on business analysis and interpretation.
Sometimes you know intuitively that there’s a way to use the available data to take the next critical step forward but you just can’t see it. It’s always worth asking for more information.
For instance, ratios derived from financial reports can be very revealing. Ratios are calculated so as to assist management in understanding the information contained within financial reports. They can help you establish more accurate key performance indicators in your business. This way you can set clearer goals and be able to measure your success more accurately.
Common ratios include:
- Breakeven Sales
- Stock Turn Ratio
- Debtors’ Days Outstanding
- Gross Profit Percentage
- Mark-up Percentage
- Net Profit Percentage
- Return On Investment
- Wages To Turn Over Percentage
- Sales Per Person
- Cost Of Goods Sold Ratio
- Current Ratio
If you would like to discuss ratios that are applicable to your business to assist you in the interpretation of financial accounts, give us a call.
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