What ratios should a businessman be monitoring to ensure that they make the most profit during the year?

What ratios should a businessman be monitoring to ensure that they make the most profit during the year?

Answers
Profit is what happens when income > costs.
jon.ellis
29 April 2011
sales volumes, price, quantities ordered and stock levels
jon.ellis
29 April 2011
So a businessman would be looking at the following components of income:
jon.ellis
29 April 2011
staff (people), premises, equipment and other costs (e.g. stationery). So close cost control is important.
jon.ellis
29 April 2011
Costs split down into
jon.ellis
29 April 2011
Making profit in one year is one thing, but making profit year after year is another. This is where customer satisfaction and the quality of the product come in. If these are not up to scratch, then any profit could be short-lived.
jon.ellis
29 April 2011
Financial planning is important for any business. You need to make sales plans (as you may need to order in stock) and move costs in line with expected business (increased sales may require more staff, for example). These plans usually find their way into budgets.
jon.ellis
29 April 2011
Hope this helps.
jon.ellis
29 April 2011
Finally, managing cash is also important. You could grow sales very quickly and profitably, but have insufficient cash to cover your liabilities - forcing you into insolvency.
jon.ellis
29 April 2011
Okay, just noticed that you are looking for ratios. Have a look at gross and net margin (income measures), return on capital employed (profit measure) and quick ratio (assets v liabilities).
jon.ellis
29 April 2011
Another useful measure is the cost:income ratio (how many times costs can be divided into income) and cash ratio (the number of times cash can be divided into the company's liabilities).
jon.ellis
29 April 2011
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