Key ratio analysis of financial statements

New business owner? Have a great product, terrific sales team, fabulous location–or better yet, a combination of all three? Congratulations!

About 400,000 new businesses start up each year in the United States. And no matter how full of optimism one might be to begin with, the fact is that 25% of new businesses close after the first year, 36% after the second, and so on, with 50% of new businesses lasting only four years.

So why is that? Well, studies show that 30% of those failures can be attributed to lack of managerial experience. This means asset and money management, things like granting credit, borrowing too much, expanding too quickly, investing hastily. Another 11% fail because they don’t understand the line of goods and services: they don’t carry enough inventory, don’t know their suppliers, and can’t live up to what they promise consumers.

But don’t lose hope if you find this could happen to you. You can learn how to manage your current assets carefully; you can improve budgeting and planning and safeguard your assets.

Besides management skills, you can increase your understanding of financial data analysis. It’s crucial to know how to assess your financial information and identify financial risk analysis. Business profitability ratios, financial statement trend analysis, and the interpretation of financial statements are all key to the continued improvement and success of your company.

Sometimes that’s hard to keep up with when you’re also responsible for handling day-to-day tasks in the workplace. Who has time to identify financial risk analysis when customers are calling and orders are waiting to be filled? How can you research financial performance analysis tools or compute profit margin ratio s when you’re busy recruiting someone to answer the phone and fill the orders? It can be hectic, starting a new business!

That’s why it pays to invest in getting some financial advice. There are companies whose job it is to help your company make more money and stay in business. Financial advisors help you understand and interpret your company’s financial data and make sound decisions based on that information. They have budgeting and planning software to share, financial data analysis tips for beginners, and experience identifying financial risk analysis.