Key Ratios Essential for Any Business

Imagine doing business without the knowledge of whether the efforts and investment spent are of any use at all or not. Ratios are vital to business, to measure growth or any advancements from its starting point.

Here are some ratios that are essential to a small business growing rapidly into a mid-size one:

Efficiency Ratios

Efficiency ratios contain vital information that help measure the effectiveness of the receivables, asset control, etc. within the business. Efficiency ratios can include measures such as Sales to Inventory Ratio, Collection Period Ratio, Assets to Sales Ratio, Accounts Payable to Sales Ratio, etc.

Solvency Ratios

Solvency ratios include information that reveal financial readiness for both long and short-term goals and obligations. Solvency ratios include measures such as  Current Liabilities to Net Worth ratio, Current Liabilities to Inventory ratio, Fixed Assets to Net Worth ratios, etc.

Profitability Ratios 

Profitability ratios help a business evaluate profits in terms of sales, total assets owned, and net worth of the business. Profitability ratios include the Return on Sales, Return on Assets, and Return on Net Worth ratios.

These ratios, together with industry best practices, allow the business to stay abreast of industry trends, overcome challenges efficiently, and ensure streamlined operations. All of these result in overall efficiency and continued revenue or income for the business, without loss in momentum.

One of the first steps towards ensuring streamlined operations and uninterrupted business growth is to ensure diligent business practices throughout the year, including evaluating the growth of a business. Analytix Solutions offers customized solutions for companies ranging from accounting and bookkeeping to more complex business requirements. For more information on how we can assist your business, call us at 781-503-9004 or email us at sales@analytix.com.

Written by

Analytix Editorial Team