Building Block #2

How well is your business doing? What are its strengths? What are its weaknesses? Is the business improving or deteriorating? These are very important questions that can start to be answered by ratio analysis. To make ratios understandable and meaningful, we look at trends over time, and when available compare them to other companies in your industry.

It is here were we introduce the four basic questions that need to be answered to give a fuller understanding of the business and any decisions that must be made.

1.    Is it Profitable? (Profitability Ratios)

2.    What is the cash flow? (Liquidity Ratios)

3.    What are the capital  needs? (Working Capital Ratios)

4.    Is it sustainable? (Leverage Ratios)

Following are the deliverables in the second building block of financial management:

  • ·       Trend analysis

  • ·       Ratio Analysis

  • ·       Benchmark analysis and financial impact (if industry information is available)

  • ·       Establish list of possible KPI’s or metrics you can measure and manage

 

Sample Analysis Report

 

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