Is your business trending up and beating the competition?
It is critical to understand how your company is performing before making any capital investment, formulating business plans or borrowing money. What you don’t know is dangerous territory for making important business decisions. Get smarter by doing the research on your company’s financial performance.
After you have calculated your operating, liquidity, profitability and leverage ratios the next step is to track your results across time periods and against industry competitors.
- Time-series analysis looks at the changes in financial indicators across similar time periods. Compare a month, quarter or fiscal year to the same period earlier.
- Cross-sectional analysis compares your financial indicators with industry competitors. Private companies are secretive with their financial data for obvious reasons so it might be impossible to compare results. Instead, find the publicly traded company that leads your industry and evaluate their financial results for a general idea of the industry standard.
You can learn to calculate and understand basic financial statement indicators including operating, liquidity, profitability and leverage ratios. Monitor your financial engine across time periods and against competitors as you safely navigate the twists and turns of the roads in your industry.