Understanding Financial Ratios

Option #2: Understanding Financial Ratios for a Small Business

Financial plans and statements are an important part of identifying how much money is needed, and of determining the health of the company through company valuation. Completing financial statements is part of the role of the entrepreneur in raising capital.

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Locate a small business where you can access the financial statements or use your own small business.

Using these financial statements, calculate the following ratios:

  • Current Ratio
  • Quick Ratio
  • Debt Ratio
  • Times Interest Turnover Ratio
  • Average Inventory Turnover
  • Average Collection Period
    • Average collection period in days
  • Average Payable Period
    • Average payable period in days
  • Net Sales to Net Assets
  • Net Sales to Working Capital
  • Net Profit on Sales
  • Net Profit on Equity

What recommendations can you make to improve the company’s financial performance in the future?

Your paper should be 3-5 pages in length and APA formatted.

 
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