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When business is bad or when tough times are ahead it is important to have a good understanding your business position. Liquidity ratios are important to businesses as they measure the ability for a business to pay its bills.
The following Key Performance Indicators (KPI) will help with business survival and future success:
The Break Even point tells a business owner what level of sales need to be achieved for their business to make a zero profit.
The Margin of Safety is another helpful defensive ratio. It tells the business owner how far sales can be reduced before they breakeven.
The Defensive Interval Ratio can inform a business how long it can continue to pay its bills without generating additional sales.
If you would like to discuss further please contact us:
McNamara & Company - Chartered Accountants, located minutes from the Melbourne CBD
Phone +61 3 9428 1062
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