You need the balance sheet with financial ratio to look at the failure or progress of your business. They are helpful in comparing the average performance of your business with the performance of the businesses of the same sort. This also helps you to know about the progress of your own business in the market and is a warning for you if you are meeting with failures. It is a suggestion to assist you to solve your business complications. By equating the ratios you watch out for any uncomplimentary trends that might come your way.
Balance sheet actually measures the ability to pay the bills at the due date and the limit to which they can be dependent on the credentials.
It depends on the following things:
They tell you about the current ratio, quick ratio and working capital. It helps you know how you can turn your assets into cash.
- Current ratio: It informs you about your business assets and let you know that whether they meet your payment schedule and are you able to pay your current debts and meet other liabilities related to the business.
- Quick ratio: It includes the flow of cash including the government securities against your current liabilities.
- Working Capital: It also measures the cash flow. It helps to know the ability whether you can bear the financial complexities or not.
Income Statement Ratio Analysis:
It depends on the following things that help us to assess about our income statement ratio analysis.
- Gross Margin Ratio
- Net Profit Margin Ratio
- Management Ratios
- Inventory turnover ratio
- Accounts Receivable Turnover Ratio
- Return on Assets Ratio
- Return on Investment Ratio