Interpreting Financial Statements

Business owners need to understand what their financial statements are telling them. The most efficient way is to apply ratios to the financial statements to uncover the message the statements are trying to tell. The principal ratios that measure financial performance are: Fixed-assets-to-net-worth. Collection period. Net-sales-to-inventory. Net-sales-to-net-worth. Net-profit-to-net-sales. Miscellaneous-assets-to-net-worth. Each one is calculated by dividing … Continued

Cash Flow, Overhead and Borrowing

There are three areas to which owners and managers must always pay close attention: cash flow, overhead control and borrowing. Cash flow When it comes to cash flow, liquidity is always a top priority. Here are a few things management might consider to improve cash flow: If market conditions allow, increase prices selectively. Small increases … Continued