However, a reasonable investment of time and effort often makes financial statements more reliable and useful. When you're ready, move ahead to examine your business performance. Most of your analysis will be based on financial ratios or on data taken directly from the financial statements. While there are recommended values for some ratios and indicators, it may be most useful to compare them with averages or typical values for similar businesses. Comparing the same ratios and indicators of similar successful businesses will help you evaluate your business more effectively.
Most people find it useful to make a chart of their ratio and financial indicator values.
Once you have begun this chart, you can add the current values to your chart each time you prepare financial statements. At a glance, you'll be able to see growth or decline in the health of your business. When the chart is updated regularly with accurate data, it will give an early warning of any problems that emerge. Using Ratios and Financial Indicators Start with your most recent balance sheets and income statements. If possible, use the balance sheet prepared on the last business day of your most recent accounting period.