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100 WAYS: #32 Develop and Monitor Key Ratios for Your Business
– June 30, 2010
Work with your CPA or CFO to develop key financial ratios which will give you meaningful clues about what is happening in your business and in your department. Here are a few examples of ratios that management should be monitoring:
- Current Ratio – This ratio provides evidence of a company’s ability to meet its current debts.
- Daily Sales to Receivable Ratio – This ratio provides an indication of how many days it takes your company to collects its receivables.
- Inventory Turnover Ratio – This ratio is an important gauge of profitability because it shows the number of times inventory turns during a business year.
- Equity Ratio – This ratio is a measurement of the long-term solvency of a corporation. It is considered by many as a key indication of credit strength of a business.
These ratios, and many others applicable to your company, will help you benchmark any piece of financial or business characteristic.
Walker Coburn
318.429.2109
wcoburn@hmvcpa.com
Walker is a Senior Auditor in our Shreveport office. He received his Bachelor of Administration in Accounting and a Masters of Accountancy from Millsaps College in Jackson, MS. Prior to returning to his hometown of Shreveport and joining Heard, McElroy & Vestal, Walker worked for KPMG in Jackson and Memphis, and more recently as a financial reporting advisor for FedEx Corporate.
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