There are many different metrics you can use to monitor your business. Four of the most important ones use the information found on your company’s balance sheet.
- Working capital – Indicates whether a company has enough short-term assets to cover its short-term debt.
- Debt to equity – Compares total liabilities to shareholders’ equity to provide an indication of how much debt a company is using to finance its assets relative to the value of shareholders’ equity.
- Current ratio – Measures a company’s liquidity or ability to pay off short-term debts.
- Quick ratio – Provides a more conservative view of how well a company can meet its short-term financial liabilities since the ratio does not include inventory and other current assets that are more difficult to liquidate.
By incorporating these four metrics into a Financial Health Metrics dashboard, a business owner can see at a glance the health of the company. In addition, historical balance sheet data provides the context and perspective on how the company’s indicators are changing over time.
I think creating these types of dashboard tools are critical especially for small business owners. The visual presentation of the information allows owners to understand their company’s financial health in under a minute! Please contact me if you want to learn more about how to set up a similar dashboard for your business.