Do ratios matter?

In a time of rising inflation, cost pressure, supply chain disruption and the energy crisis resulting from anything from Brexit, Covid-19, the Ever Given being lodged in the Suez Canal to shortages of HGV drivers and the recent invasion of Ukraine.

All have had an impact on businesses and their bottom lines. It has never been more critical for business owners to have a full and clear understanding of their financial position.

Understanding and analysing your financial statements as a business owner is vital if you want to evaluate your performance and make changes based on your knowledge.

Small businesses can be agile and at their best when they plan and react quickly. One major achilles heel for small businesses is poor profitability.

A business can succeed by knowing how to identify, track and act on profitability ratios and can determine whether your company will thrive or not -think of it as financial literacy. Understanding an array of ratios can help business owners to ensure their company is efficient and on the correct path.

These ratios can influence; decisions on which operations continue, changes in prices, choosing purchasing practices, considering bulk discounts and identifying where efficiencies can be improved in areas like material wastage.

Understanding operating profit margins highlights a business’ financial viability and core operations after variable production costs.

These ratios can demonstrate how the management team is running a business and track spending decision-making.

Remember, financial ratios and the understanding of them will not be lost on investors and funders and will form a major part in their decision whether to invest or not.

Enjoyed this? Read more from Mark Gibbons, Access to Finance

Latest news

1

Councils back Combined County Authority proposals Lancashire Devolution

Councils back Combined County Authority proposals

18 Mar 2024

2

Red Rose Awards honours best of Lancashire business Red Rose Awards Winners 2024

Red Rose Awards honours best of Lancashire business

15 Mar 2024

3

RfM Transform helps business park achieve carbon negative status HR Trends from RfM Transform (9).png.png

RfM Transform helps business park achieve carbon negative status

19 Mar 2024

4

Derelict Darwen site transformed into fully-occupied business park Mill Bank Business Park

Derelict Darwen site transformed into fully-occupied business park

18 Mar 2024

5

Ways to increase flexibility in the workplace Flexible Working LBV.jpg.jpg

Ways to increase flexibility in the workplace

18 Mar 2024

Background image for hub sign up block

LBV Hub

Reach 50,000 members of the Lancashire business community

Post your news
Post your events
Post your offers
Company profile
Social reach
Magazine coverage
Sign-up
Events
LBV115 Magazine Launch Event
DSC9389
Networking
20 Mar 2024

LBV115 Magazine Launch Event

Delta Hotels by Preston Marriott, Garstang Road, Broughton, PR3 5JB

16:00 - 18:00

Business Networking in Blackburn - BNI Vista
EVENT LISTING SIZING Vista.png.png
LBV Hub Networking
19 Mar 2024

Business Networking in Blackburn - BNI Vista

Hampton by Hilton, 2 Frontier Ave, Blackburn, BB1 3AL

06:45 - 08:30

Business Networking in Chorley - BNI Endeavour
EVENT LISTING SIZING Endeavour.png.png
LBV Hub Networking
19 Mar 2024

Business Networking in Chorley - BNI Endeavour

Oak Royal, Bury Lane, Chorley, PR6 8SW

06:30 - 08:30

Business Networking in Accrington - BNI Zeus
EVENT LISTING SIZING Zeus.png.png
LBV Hub Networking
20 Mar 2024

Business Networking in Accrington - BNI Zeus

The Mill House, Corn Mill Yard, Accrington, BB5 5HX

06:45 - 08:30

Business Networking in Lancaster - Eden Business Network
EVENT LISTING Eden Business Network.png.png
LBV Hub Networking
20 Mar 2024

Business Networking in Lancaster - Eden Business Network

The Borough, 3 Dalton Square, Lancaster, LA1 1PP

18:30 - 20:30

North West Apprenticeship & Careers Expo 2024
APP EXPO 23 IMAGE.jpg.jpg
LBV Hub Exhibitions
20 Mar 2024

North West Apprenticeship & Careers Expo 2024

Sir Tom Finney Sports Centre, Preston, PR1 2HE

12:00 - 19:00

Business Networking in Preston - BNI Diamond
EVENT LISTING BNI Diamond.png.png
LBV Hub Networking
20 Mar 2024

Business Networking in Preston - BNI Diamond

The Marriot Hotel, Garstang Road, Broughton, PR3 5JB

07:15 - 09:00

The Allo Allo Comedy Dining Experience
Allo-Allo-Comedy-Dinner-Crow-Wood-Burnley.jpg.jpg
LBV Hub Social
21 Mar 2024 - 21 Mar 2024

The Allo Allo Comedy Dining Experience

Crow Wood Hotel & Spa, Burnley, BB12 0RT

18:45 - 23:00

Creative Lancashire PowWow networking
Creative Lancashire icon.jpg.jpg
LBV Hub Networking
21 Mar 2024

Creative Lancashire PowWow networking

Society1 Coworking Space, Preston, PR1 3LT

17:30 - 19:30

Business Networking in Lancaster - BNI Castle
EVENT LISTING BNI Castle.png.png
LBV Hub Networking
21 Mar 2024

Business Networking in Lancaster - BNI Castle

Vale of Lune RUFC, Powder House Lane, Lancaster, LA1 2TT

06:45 - 08:30

Business Networking in Burnley - BNI Kudos
EVENT LISTING BNI Kudos.png.png
LBV Hub Networking
21 Mar 2024

Business Networking in Burnley - BNI Kudos

Prairie Sports Village, Windemere Avenue, Burnley, BB10 2FU

06:45 - 08:30

Business Networking in Preston - BNI Brunch
EVENT LISTING SIZING Brunch .png.png
LBV Hub Networking
22 Mar 2024

Business Networking in Preston - BNI Brunch

Samlesbury Preston Hotel, Preston New Road, Preston, PR5 0UL

09:30 - 11:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more Lbv115 Online Graphic
Subscribe now

Weekly news bulletin