Financial Guide for SMEs - SME Corporation Malaysia

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Financial Guide for SMEsChapter 2Assessing the Financial Healthof Your Business22Chapter 2-5 p22-65 Eng.indd 228/15/11 5:01:50 PM
Financial Guide for SMEsAssessing the Financial Health of Your BusinessA helpful tool that can be used to predict thesuccess, potential failure and progress of yourbusiness is fi nancial ratio analysis. By spending timedoing fi nancial ratio analysis, you will be able to spottrends in your business and compare the fi nancialperformance and condition with the averageperformance of similar businesses in the sameindustry.Although there are many fi nancial ratios that youcan use to assess the health of your business, in thischapter we will focus on the main ones that can beeasily used. The ratios are grouped together underthe key areas that you should focus on.Liquidity RatiosThese ratios will assess the ability of your businessto pay its bills in due time. They indicate the easeof turning assets into cash and include the currentratio, quick ratio, and working capital (which arediscussed in detail in Chapter 5).Financial ratioanalysis willprovide theimportantwarning signs thatcould allow you tosolve yourbusinessproblems beforethey destroyyour businessHINTUse these ratios toassess if yourbusiness hasadequate cash to paydebts in due timeIn general, it is better to have higher ratios in this category, that is, more currentassets than current liabilities as an indication of sound business activitiesand an ability to withstand tight cash fl ow periods.Current ratio =Total current assetsTotal current liabilitiesOne of the most common measures of fi nancial strength, this ratio measureswhether the business has enough current assets to meet its debt obligationswith a margin of safety. A generally acceptable current ratio is 2 to 1; however,this will depend on the nature of the industry and the form of itscurrent assets and liabilities. For example, the business may have currentassets made up predominantly of cash and would therefore survive with arelatively lower ratio.23Chapter 2-5 p22-65 Eng.indd 238/15/11 5:01:51 PM
Page 1 and 2: FinancialGuide for SMEs
Page 3 and 4: Financial Guide for SMEsAbout the G
Page 5 and 6: Financial Guide for SMEsChapter6 :
Page 7 and 8: Financial Guide for SMEsIntroductio
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Page 11 and 12: Section I : Business Finance Basics
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Financial Guide for SMEsStep 3: Oth
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Financial Guide for SMEsAdam will h
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Section III : Financing Your Busine
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Financial Guide for SMEsDebt, Equit
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Financial Guide for SMEsDefinitions
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Financial Guide for SMEsTypes of Se
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Repayment of Debt Finance/ Investme
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Financial Guide for SMEsAdvantagesD
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Financial Guide for SMEsDeciding Be
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Financial Guide for SMEsProducts fo
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Financial Guide for SMEsTransaction
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Financial Guide for SMEs• Do you
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Financial Guide for SMEs107chapter
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Financial Guide for SMEsTrade Finan
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Financial Guide for SMEsThe option
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Financial Guide for SMEsInternation
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Financial Guide for SMEsProduct Usa
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Section IV : Managing LendersBanker
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Financial Guide for SMEsApplying Fo
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Financial Guide for SMEsSME FINANCI
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Financial Guide for SMEs2.3.4.5.Sec
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Financial Guide for SMEs3.4.Section
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Financial Guide for SMEsType of Doc
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Financial Guide for SMEs3.4.5.6.7.8
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Financial Guide for SMEsLoan Applic
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Financial Guide for SMEsExample of
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Financial Guide for SMEssheet will
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Financial Guide for SMEsTo gain an
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Financial Guide for SMEs141chapter
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Financial Guide for SMEsRefinancing
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Financial Guide for SMEsBenefits of
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Financial Guide for SMEsChange in v
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Financial Guide for SMEsBanking Rev
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Financial Guide for SMEsYou should
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Financial Guide for SMEsManaging Yo
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Financial Guide for SMEsManaging Di
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Section V : Better Business Financi
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Financial Guide for SMEsFinancial C
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Financial Guide for SMEsProcedureAc
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Financial Guide for SMEsBank Reconc
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Financial Guide for SMEsEmployeesAr
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ChapterSix-Cash and ProfitCashYouro
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Financial Guide for SMEsACKNOWLEDGE
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Financial Guide for SMEs - SME Corporation Malaysia

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