Having a clear picture of business financial health can help you make more informed decisions about your business’s course. As a business owner, it is vital to know how your business is doing and understand the underlying reason for any loss or profit. Doing so enables you to avoid any previous mistakes and take advantage of any opportunity if it presents itself again. Few other reasons why you must be aware of business financial health are –
It is important that your accountant or your outsourced accounting services provider assist you in evaluating the business’s financial health with the help of various tools. Let us discuss a few critical tools that can help you get a clear picture of your business’s financial health.
While it is impossible for a business owner to check every record and follow up with your bookkeeper regularly, you can always check your business financial statement as it provides comprehensive detail about all your economic activity.
2. Financial Ratio Analysis:
As we talk earlier, ratio analysis is derived from the comparison of different items appearing in the books of accounts or financial statements like a balance sheet. It provides a precise and understandable interpretation of the business’s health. Ratio analysis helps you simplify the complex numbers in financial statements. Ratios fall under various categories, let us discuss each category in detail and few important ratios as well –
Understand that no single ratio or statement is sufficient to analyse the overall financial health of your organisation, you have to use a combination of ratio analyses. These two tools can help you in getting a clear picture of your business’s financial health. If you want assistance in calculating these values for you, you can contact our accountants at Whiz Consulting who are experts in preparing financial statement analysis and calculating ratios on your behalf.