Key Financial Ratios Every Small Business Owner Should Know
Raw numbers on a financial statement only tell part of the story. A few simple ratios turn them into something you can actually compare month to month.
Current ratio
Current assets divided by current liabilities, showing whether the business can cover its short-term obligations. A ratio comfortably above 1 suggests healthy short-term liquidity.
Net profit margin
Net profit divided by revenue, showing what percentage of every sales dollar actually becomes profit after all expenses.
Accounts receivable turnover
How quickly customers pay their invoices on average — a slowing turnover rate is often the earliest warning sign of a cash flow problem.
None of these require complex math — most bookkeeping software calculates them automatically once your books are current.
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