The use of financial ratios can be especially important for the smaller business. These businesses may not have the complexity of a multi-division corporation, however, small business owners can become so immersed in the daily operations that he or she can fail to see adverse trends developing.
Financial ratios can be the impartial indicators at the financial trends at the business.
They are the pressure gauges that should be read at least once a year. Financial ratios do not have to be difficult. While there are dozens that are used by financial analysts there are six that can be used by every small business owner. These six ratios are often used by bankers to evaluate the performance at a potential borrower. A word of caution.