{"id":8760,"date":"2015-06-19T06:14:33","date_gmt":"2015-06-19T04:14:33","guid":{"rendered":"http:\/\/www.officetodo.com\/public\/?p=8760"},"modified":"2015-06-13T06:15:55","modified_gmt":"2015-06-13T04:15:55","slug":"considerations-behind-financial-ratios-to-have-them-or-not-to-have-them","status":"publish","type":"post","link":"http:\/\/www.officetodo.com\/public\/considerations-behind-financial-ratios-to-have-them-or-not-to-have-them\/","title":{"rendered":"Considerations behind financial ratios – to have them or not to have them?"},"content":{"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 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":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t