Ratios compress your accounts into verdicts. These five answer the questions owners actually ask — am I efficient, liquid, indebted, profitable and collecting?
The five
- Gross margin: pricing power and cost control at the top of the funnel — watch its trend more than its level
- Current ratio: near-term assets vs near-term obligations — the solvency-this-quarter check banks read first
- Receivable days: sales locked in customer credit — rising numbers predict cash trouble months early
- Debt service coverage: cash generated vs loan obligations — the ratio every lender computes about you
- Net margin: what truly remains — compare across years and against your sector, not against wishes
Using them without a finance degree
Compute quarterly from your MIS, plot the trend, and interrogate any ratio that moved. The movement is the message.
The caveat
Ratios are only as honest as the books beneath them — stock errors and unbooked liabilities poison every downstream number.
Ratio dashboards ship with our accounting and vCFO service — see yours.
