Balance Sheet: the importance of ratios for your company

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Did you know that the balance sheet can be used as a powerful tool for decision-making in your company ?

Whether it's to start a new business, seek new investors, or even, in the worst case scenario, close a company that isn't performing well, the balance sheet is an indispensable resource.

Through the balance sheet, it is possible to find several indicators of the company's health , which go far beyond cash availability or business results. It reports the company's assets, rights and obligations in the form of accounting accounts.

Among the most important points of the balance sheet are the financial indicators , essential tools for controlling and planning the business.

Want to know more about the indexes and indicators that singapore whatsapp lead can be responsible for your company's success? Keep reading this article!

. Liquidity ratio
The liquidity index shows how easy it is for a company to convert its assets (goods) into cash in the short or long term, that is, it shows its ability to pay its obligations, such as taxes, payroll and loans.

There are two main types of liquidity ratios, each with a specific purpose:

General liquidity

It shows the company's ability to honor its business commitments in the medium and long term. If this index is less than 1, you will certainly have problems honoring your long-term commitments, such as: tax installments, bank loans, PRONAMPE, among others.

Current liquidity

This index shows the entrepreneur the ability of his company to meet short-term payments, such as payroll, suppliers and taxes. If this index is less than 1, be prepared for immediate problems in honoring your payments.

. Debt level index
This index allows you to analyze whether a company has very high debt, whether with third-party capital or with its own capital. Although they are directly related, unlike liquidity ratios, the calculation of these ratios only considers debts, disregarding cash or assets. Here are some:

Debt to equity ratio

This indicator shows how much of the company's obligations are due in the short term. The higher the percentage of this index, the greater the company's need to have a good cash flow to meet immediate obligations (taxes, payroll, short-term loans, suppliers, among others).

In other words, the higher the level of debt, the greater the company's solvency risk.

General indebtedness

This indicator shows how much third-party participation there is in the company's total resources.

A percentage above 50% of third-party participation indicates that the company uses more third-party resources than its own resources to honor its commitments, which can completely compromise cash flow. In addition, it also shows that the company is not able to sustain itself with its own resources (Sales or Service Revenue).

. ROI
ROI, which stands for Return Over Investment, better known as Return on Investment, indicates exactly the opposite of the first two indexes, as it determines the return on a specific investment, such as the participation of capital in other businesses, for example. A positive indicator demonstrates a promising investment , while a negative indicator contests that the investment was not successful.

Among the examples of indexes presented, the first two serve to demonstrate the operational health of the company. The third is a great tool for making decisions about whether to continue or terminate an investment.

Therefore, what should be considered at the end of this article is the importance of the entrepreneur having the support of a system that allows the organization of data, as well as its exposure, in a way that facilitates the analysis of the financial health of the business.

Lowtax , in addition to preparing its clients' balance sheets, has an extremely efficient Business Intelligence system, or BI – in Portuguese, Business Intelligence – that calculates these and other equally or even more important indexes. More than providing numbers, Lowtax offers a complete analysis of the business, indicating the best paths to follow.