Next time you meet with your accountant, ask him or her to go over four key financial measures with you, suggests Gary Sipiorski, president of Citizen’s State Bank of Loyal in Loyal, Wis. “These numbers can help you assess your business and whether your money is working for you.”
1. Know your equity position, or loan-to-asset ratio. It should be 30 percent or greater.
2. Figure your asset-turnover rate. You ought to generate $1.40 for every dollar invested in your business.
3. Know your return on equity. It should be 6 percent or better.
4. Know your return on assets. The rate should be at least 8 percent.
Sipiorski points out that with increasingly narrow profit margins, it’s more important than ever that you invest well and make every dollar work for you.