You can do the same for your business by regularly checking some key ratios. It sounds technical, but it’s actually quite simple. It’s little more than dividing one figure by another to get a ratio. You can get the figures you need from your accounting software - it may even work out the ratios for you.
Just as your temperature gauge tells you whether your car is overheating or not, these ratios can tell you how well your business is performing – so it pays to check them regularly.
In this article we’ll look at some of the common ratios used by business owners, how to calculate them, and how to use them. The key is to compare your ratios against a suitable benchmark such as previous years, or industry averages, to assess how well your business is doing. This is not an exhaustive list – your accountant can help you identify the key ratios for your business.