Profitabilty Ratio in Plain English For That Start Up Entrepreneur

Are you a start up and employing the services of an accountant will further eat into your capital?

Are you that small scale entrepreneur who has until now always believed that your profit is your cash in hand at the end of the day

This is a must read for you because today I will be try to explain business profitabilty ratios in the simplest terms possible.

First, before you embark on a business ensure you have a register to document the cost of every instrument equipment or object purchased to be used in the running of the business. Ill buttress this with an example.

I want to start selling juice in my neighborhood. I record the van and staff as my cost but fail to record my juice processor as an asset and must be documented same. However, in recording the cost of this juice processor the price it was obtained 4 years ago is not what is the documented but the current price in the market. The first profitability ratio that can be gotten is by dividing your net sales by your average total assets. This gives your asset turnover ratio. A high percentage indicates a healthy and profitable business.