Wid, Wad and Gad Theories in Gender and Development Essay

1462 Words Mar 2nd, 2016 6 Pages
The Ratios
Profitability Sustainability Ratios
How well is our business performing over a specific period, will your social enterprise have the financial resources to continue serving its constituents tomorrow as well as today? Ratio | What does it tell you? | Sales Growth =

Current Period –Previous Period Sales
Previous Period Sales | Percentage increase (decrease) in sales between two time periods.

If overall costs and inflation are increasing, then you should see a corresponding increase in sales. If not, then may need to adjust pricing policy to keep up with costs. | Reliance on Revenue Source =

Revenue Source Total
RevenueTotal Revenue | Measures the composition of an organization’s revenue sources (examples are sales,
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Is there enough gross profit to cover your indirect costs. Is there a positive gross margin on all products? | Net Profit Margin =

Net Profit
Sales | How much money are you making per every $ of sales. This ratio measures your ability to cover all operating costs including indirect costs | SGA to Sales =

Indirect Costs (sales, general, admin)
Sales | Percentage of indirect costs to sales.

Look for a steady or decreasing ratio which means you are controlling overhead | Return on Assets =

Net Profit Average
Total Assets | Measures your ability to turn assets into profit. This is a very useful measure of comparison within an industry.

A low ratio compared to industry may mean that your competitors have found a way to operate more efficiently. After tax interest expense can be added back to numerator since ROA measures profitability on all assets whether or not they are financed by equity or debt | Return on Equity =

Net Profit
Average Shareholder Equity | Rate of return on investment by shareholders.

This is one of the most important ratios to investors. Are you making enough profit to compensate for the risk of being in business?

How does this return compare to less risky investments like bonds? | Operational Efficiency Ratios
How efficiently are you utilizing your assets and managing your liabilities? These ratios are used to compare performance over multiple periods. Ratio | What does it tell you? | Operating Expense Ratio =

Operating Expenses

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