I was asked just recently if there\u2019s a point in presenting a financial ratio if it\u2019s so much out of what\u2019s normally expected, i.e. ROA is say o.002% representing this the return on assets close to zero, or an accounts receivable turnover ratio is say 1 since all the company\u2019s sales are still as outstanding receivables and nothing has been collected.\u00a0<\/p>\n
The matter of fact that those ratios are outside what one would normally expect isn\u2019t in itself a reason to not disclose them within your financial reporting should financial ratios be required to disclose. In itself it also isn\u2019t a reason to monitor such ratios should we have a focus on ensuring they improve one day. It may be that we\u2019ve defined ourselves a goal to change the ROA from 0.002% to 1% within 5 years and as such I believe it\u2019s important to monitor such a ratio.<\/p>\n
However, something to take from this discussion I had, was the consideration of which ratios are indeed important and relevant for an entity or an industry and thus I encourage you to find out what should yours be. It is important to have some ratios defined for your business purely from a strategic perspective \u2013 your activities, visions and goals are more profound and structured once you have ratios.
\nDefine the ratios, determine the current situation, goals and start working towards them.<\/p>\n","protected":false},"excerpt":{"rendered":"
I was asked just recently if there\u2019s a point in presenting a financial ratio if it\u2019s so much out of what\u2019s normally expected, i.e. ROA is say o.002% representing this the return on assets close to zero, or an accounts receivable turnover ratio is say 1 since all the company\u2019s sales are still as outstanding […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"class_list":["post-8760","post","type-post","status-publish","format-standard","hentry","category-4-2-financial-ratios"],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/8760","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=8760"}],"version-history":[{"count":1,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/8760\/revisions"}],"predecessor-version":[{"id":8761,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/8760\/revisions\/8761"}],"wp:attachment":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=8760"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=8760"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=8760"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}