Financial ratios are essential tools that provide valuable insights into your business’s financial health. They turn raw numbers into actionable data, helping you understand profitability, liquidity, efficiency, and solvency.
Regularly tracking these metrics can help spot early warning signs and guide strategic decisions.
🔍 Key Financial Ratios to Monitor:
📘 Current Ratio (Current Assets / Current Liabilities): Measures your business’s ability to pay short-term obligations. A ratio above 1 is generally healthy.
💰 Gross Profit Margin (Gross Profit / Revenue): Shows how efficiently you’re producing goods or services. Higher margins indicate better profitability.
📉 Net Profit Margin (Net Profit / Revenue): Reflects overall profitability after all expenses. Useful for comparing your performance over time.
⚖️ Debt-to-Equity Ratio (Total Debt / Total Equity): Indicates how leveraged your business is. A high ratio could signal financial risk.
🔄 Inventory Turnover (COGS / Average Inventory): Evaluates how efficiently inventory is managed. Faster turnover means better efficiency.
📈 Why It Matters: Understanding and tracking financial ratios empowers you to make informed decisions, pitch to investors, and manage growth sustainably.
At Bing Bong, we can help calculate and interpret these ratios, translating financial data into clear action plans.
