Business Performances

More now than ever before it is becoming the desire of a majority of people to start and succeed in their own business. People are tired of working for someone else and having their dreams deferred while life passes them by. If you are one of the millions thinking about a business to start, I need to ask you a very important question:

What wakes you up in the morning and keeps you up at night?

It is the answer to this question that will lead you to the business that you should start. Your success in life and business depends on the passion you have for what you accomplish everyday.

Before you begin your business venture ask yourself three very important questions?

• What things in life excite me?

• What would make me work through the struggles and accept the risks that could end in failure?

• What sends chills down my spine when I think of doing it well?

If you don’t build a business in an area where passion and excitement motivate you everyday, you will ultimately become bored with your business and it will fail. Now understand that when I say fail I don’t necessarily mean you will close the doors and turn out the lights. Your business may indeed continue to provide you with income, but it will fail you because your life will loose meaning as you become a slave to a business that bores you!

This is why I struggle so with most pre-packaged online business ventures. They offer you the opportunity for making a lot of money. However money is not all that it is cracked up to be if there is nothing but money to be had in your life. (Otherwise there are some very unique not to mention illegal ways to make lots of money quickly!) In networking as well as franchising and other businesses where you buy into someone else’s dream, you either love it forever or it looses its luster rather quickly. That is why even the best of these internet entrepreneurs generally move from company to company looking for the thing that excites them for the time being.

I prefer finding out what really turns my crank and going after it. My dream is the one that wakes me up in the morning and keeps me up at night. Your dream is what will do that for you as well.

So … before you jump into something that you will hate worse than your job, take some time and answer this question for yourself. When you come up with the answer that is best for you, you will know it. You will not be able to turn from it. It will eat at you and take up valuable time in your day. At that point you can begin the research process that will lead you to creating a value that you can offer to others who have the same interests as you.

Business ratios are tools that help you in evaluating the current performance of your business. They are also very effective in helping you detect problem areas within your business before they get out of hand. Business ratios are mathematical relationships between different items in the financial statements. They are quite simple to calculate and learn, but require that you have some basic knowledge about financial statements.

Today we will discuss three different types of business ratios, although there many more types that are used in business analysis on a regular basis.

Liquidity ratios. These types of ratios measure the ability of a business in meeting its short-term obligations. One major business ratio under this category is the current ratio, calculated as follows:

Current ratio = Total Current Assets / Total Current Liabilities

The higher the current ratio, the more capable the business is in meeting its short-term obligations. A current ratio which is lower than 1 usually indicates that the business is not able to meet its short-term obligations when they fall due. Although a low current ratio is not a sign of good financial health, it doesn’t necessarily translate into bankruptcy because there are many different ways that a company can secure short-term financing to meet its emergency needs.

Leverage ratios. These types of ratios measure the degree to which a business is financed by debt. One major business ratio under this category is the debt to equity ratio, calculated as follows:

Debt to Equity ratio = Total Long-Term Debt / Owners’ Equity

A high debt to equity ratio usually means that a business has aggressively financed its growth with debt. The risk in this is that the interest costs of the debt will not be covered by the return that is generated by the growth.

Activity ratios. These types of ratios measure how effective the business is in using its resources. One major business ratio under this category is the inventory turnover ratio, calculated as follows:

Inventory turnover ratio = Sales / Inventory

The inventory turnover ratio for a specific operating period essentially shows how many times a business’s inventory is sold and replaced in that period. A low ratio is usually an indication of poor sales or excessive inventories. A high ratio usually indicates a high level of sales or insufficient inventories to meet customer demand.

Welcome to Business Performances!

How is your business currently performing in its industry? This site is all about how you can improve the performance of your business. Here you can read articles, news and case studies about business, finance, technology, real estate, investing, production and other industries. Improve your business with Business Performances.