Using Ratio Analysis
Understanding and managing performance indicators
“There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction.†(John F. Kennedy)
“A stockbroker is someone who takes all your money and invests it until it’s gone.†(Woody Allen)
Ratio analysis is no longer simply the preserve of accountants and financial experts: managers at all levels use ratios for business planning and decision-making. Furthermore, ratios are often used to support systematic analysis of suppliers, customers and competitors, as well as more general market and industry trends.
This toolkit explains how to ensure success with ratios.
Length: 10 pages
Contents:
The Benefits
Action Checklist: Using Ratio Analysis
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Consider which ratios are most appropriate for each part of the business
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Understand what the ratio means
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Choose the best ratio
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Focus on ratios relating to markets and products
Avoiding Problems – this includes practical techniques to help avoid potential pitfalls with ratios.
Dos and Don’ts
Key Questions
Things You Can Do
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Discuss ratios with colleagues
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Find out about other organizations’ ratios
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Manage the flow of information (and use the Information Life Cycle)
Further Action
Further Information
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