Do you check your profit and loss statements and balance sheets monthly?
They tell you how profitable your business is, says our friend Ruth King.
Your balance sheet shows your current assets divided by current liabilities.
Current assets are cash, accounts receivable, inventory and prepaid expenses.
Current liabilities are accounts payable, taxes payable, deferred maintenance revenue and current portion of long term debt.
Increasing current ratio, most of the time, means increasing profitability. Decreasing current ratio, most of the time, means decreasing profitability.
Your balance sheet also tells you if:
• You may be running out of cash
• Have uncollected billings you need to take action to collect.
• You are taking on too much debt, too much inventory or other cash suckers.
Your balance sheet is your weather vane. It gives warning signs of impending problems so that you can take care of them before they become major crises.
Want more on cash management? Order Ruth’s book, “The Courage to be Profitable: Get and Stay Profitable in Less than 30 Minutes a Month” on Amazon. You can sign up for her free newsletter at email@example.com
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