How to analyze your current finances

To understand and value a company, investors examine its financial position by studying its financial statements and calculating certain ratios. Fortunately, it is not as difficult as it sounds to perform a financial analysis of a company. The process is often a part of any program evaluation review technique (PERT), a project management tool that provides a graphical representation of a project’s timeline.

Key Takeaways:

  • Investors value a company by examining its financial position based on its financial statements and calculating certain ratios.
  • A company's worth is based on its market value.
  • To determine market value, a company's financial ratios are compared to its competitors and industry benchmarks.

Understanding an Analysis of a Company's Financial Position

If you borrow money from a bank, you have to list the value of all of your significant assets, as well as all of your significant liabilities. Your bank uses this information to assess the strength of your financial position; it looks at the quality of the assets, such as your car and your house, and places a conservative valuation upon them. The bank also ensures that all liabilities, such as mortgage and credit card debt, are appropriately disclosed and fully valued. The total value of all assets less the total value of all liabilities gives your net worth or equity.

Evaluating the financial position of a listed company is similar, except investors need to take another step and consider that financial position in relation to market value. Let’s take a look.

The Balance Sheet

Like your financial position, a company’s financial situation is defined by its assets and liabilities. A company’s financial position also includes shareholder equity. All of this information is presented to shareholders in the balance sheet.

Suppose that we are examining the financial statements of the fictitious publicly listed retailer The Outlet to evaluate its financial position. To do this, we review the company’s annual report, which can often be downloaded from a company’s website. The standard format for the balance sheet is assets, followed by liabilities, then shareholder equity.

Current Assets and Liabilities

On the balance sheet, assets and liabilities are broken into current and non-current items. Current assets or current liabilities are those with an expected life of fewer than 12 months. For example, suppose that the inventories that The Outlet reported as of Dec. 31, 2018, are expected to be sold within the following year, at which point the level of inventory will fall, and the amount of cash will rise.

Like most other retailers, The Outlet’s inventory represents a significant proportion of its current assets, and so should be carefully examined. Since inventory requires a real investment of precious capital, companies will try to minimize the value of a stock for a given level of sales, or maximize the level of sales for a given level of inventory. So, if The Outlet sees a 20% fall in inventory value together with a 23% jump in sales over the prior year, this is a sign they are managing their inventory relatively well. This reduction makes a positive contribution to the company’s operating cash flows.

Current liabilities are the obligations the company has to pay within the coming year and include existing (or accrued) obligations to suppliers, employees, the tax office, and providers of short-term finance. Companies try to manage cash flow to ensure that funds are available to meet these short-term liabilities as they come due.

The Current Ratio

The current ratio—which is total current assets divided by total current liabilities—is commonly used by analysts to assess the ability of a company to meet its short-term obligations. An acceptable current ratio varies across industries, but should not be so low that it suggests impending insolvency, or so high that it indicates an unnecessary build-up in cash, receivables, or inventory. Like any form of ratio analysis, the evaluation of a company’s current ratio should take place in relation to the past.

Non-Current Assets and Liabilities

Non-current assets or liabilities are those with lives expected to extend beyond the next year. For a company like The Outlet, its biggest non-current asset is likely to be the property, plant, and equipment the company needs to run its business.

Long-term liabilities might be related to obligations under property, plant, and equipment leasing contracts, along with other borrowings.

Financial Position: Book Value

If we subtract total liabilities from assets, we are left with shareholder equity. Essentially, this is the book value, or accounting value, of the shareholders’ stake in the company. It is principally made up of the capital contributed by shareholders over time and profits earned and retained by the company, including that portion of any profit not paid to shareholders as a dividend.

Market-to-Book Multiple

By comparing the company’s market value to its book value, investors can, in part, determine whether a stock is under- or over-priced. The market-to-book multiple, while it does have shortcomings, remains a crucial tool for value investors. Extensive academic evidence shows that companies with low market-to-book stocks perform better than those with high multiples. This makes sense since a low market-to-book multiple shows that the company has a strong financial position in relation to its price tag.

Determining what can be defined as a high or low market-to-book ratio also depends on comparisons. To get a sense of whether The Outlet’s book-to-market multiple is high or low, it should be compared to the multiples of other publicly listed retailers.

In summary, a company's financial position tells investors about its general well-being. A financial analysis of a company's financial statements—along with the footnotes in the annual report—is essential for any serious investor seeking to understand and value a company properly.

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When you’re trying to assess your financial situation, it can be tough to know exactly where you stand – or how you compare to others. To help you get a handle on how your situation stacks up, take a look at the financial questions listed below.

Do you have a low amount of debt relative to your income?

Make a list of the balance, interest rates, and monthly payments for each of your debts. Then, calculate your monthly debt-to-income ratio by dividing the amount you owe by the amount you make.

Do you have enough savings to cover an unexpected expense or emergency?

The rule of thumb is to have emergency savings to cover three to six months worth of expenses.

Are you on track with your retirement contributions?

To evaluate your financial success in this area, look at how much you’ve put into an employer 401(k) or pension, a personal IRA, a certificate of deposit, or any stocks and bonds you have designated for retirement.

Do you regularly contribute to your personal savings?

While emergency savings and retirement savings may address some of your immediate and future needs, it’s also important to have savings for other goals, such as buying a car or a house.

If your financial situation seems to be on track, you can keep that positive momentum going by building your wealth and investing for the future. If not, you may want to try building a better personal budget, so you can increase your savings or pay down any of the debt you have left. Others may consider credit counseling or debt management. You may also want to take steps to improve your credit score.

Empower yourself with financial knowledge

We’re committed to helping with your financial success. Here you’ll find a wide range of helpful information, interactive tools, practical strategies, and more — all designed to help you increase your financial literacy and reach your financial goals.

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These budgeting tips will help you set up your budget categories, how to do a spending analysis, and get on your way to your personal finance goals, fast.

I ‘m going to warn you. This might be a shocking experience. The first step to making a budget that works is to know what your spending habits are right now. Because I know you don’t want to spend hours mulling over your bank statements, today I’m going to show you how to analyze your spending, fast.

When there never seems to be quite enough at the end of the month, but you’re not quite sure where it’s all going, and quite frankly, you’re a little afraid to find out? Ya, I’ve been there too. I tried so hard to keep a budget for years before I finally learned a few simple changes that made it so much easier! And that’s when we started making big progress on our journey to debt free!

The biggest problem with our budget wasn’t that there wasn’t enough money, not really. It was that we didn’t even know where our money was going!

That fear of the unknown led to a lot of stress surrounding our finances.

Here’s the great news! As soon as we got a clear picture of our finances and started working toward our plan for financial freedom, all that underlying anxiety disappeared. Even before we ever pinched an extra penny or made an extra loan payment, we were feeling more free already! I hope the same will be true for you too!

So here’s how we’re going to do it.

How to Analyze Your Spending, FAST!

When I first started out budgeting, I gathered all of our bank statements and receipts from the previous month, and laboriously entered them into a spreadsheet. Then I tried to make sense of what we were spending. It took hours and hours of my time and concentration away from my family and the things I would much rather be doing.

Then I found a huge shortcut. It took a tiny fraction of the time.

Here’s the trick. It’s so simple. I started using to manage my budget. It’s a completely free program that allows you to easily track ALL of your financial accounts all in one place. (I’m not an affiliate and they’re not a sponsor, this is what I really use because it works.)

There are a few other online budgeting tools out there, but none that are honest-to-goodness completely free. That’s what made Mint most appealing to me when we were starting out on our journey to paying off our debt.

When I signed up and started adding my accounts, it imported the previous months’ of transactions. It even started categorizing that spending automatically into different budget categories. That means 80% of my budget analysis was done for me in minutes, without the hours of studying bank statements!

I was able to add and track every different account including savings, checking, credit cards, all our student loans, and even Paypal!

If you use Mint to start analyzing your spending, you will need to go through and double check that the budget categories for each transaction are correctly assigned.

This is the point where you’ll need to make some decisions about which categories to use for your budget. You can see from the image above that Mint has many different categories available, plus you can create your own custom categories.

In my experience, you want to have enough categories that it gives you a clear picture of your finances but not so many that it gets cumbersome to manage. I started out with 10 categories and didn’t find that to be enough to really see where our money was going. I now have about 3 dozen.

If there’s a particular category where you have struggled in the past, I’ve found that the more you break it down, the easier it is to see where the overspending is happening.

This was the case for our grocery budget. It really helped when I started breaking out food separate from household supplies like toilet paper and shampoo.

As a business owner, running a business is never an easy feat, especially if you’re going to deal with the financial aspects.

However, having great financial health is essential to determine your business’s potential for long-term growth. This is one reason why you should be analysing your business finances to avoid financial woes and ensure a financially stable future.

How to analyze your current finances

Typically, financial analysis refers to a process of studying and assessing the viability, profitability, and stability of a business. While it can be a complex and time consuming undertaking, it plays a vital role in keeping the company financially afloat and competitive.

If you’re planning to analyse your business finances, below are the four factors to consider from the get-go:

1. Revenues

When conducting a financial analysis for your business, one of the important things that should be taken into account is the revenues. Generally, the revenues are considered as the company’s primary source of cash, which is why these play an essential part in analysing the financial health of your organization.

For example, if your company has a steady flow of revenue, the amount of cash available will be higher than the amount needed to cover all expenses. This can be a good indicator that your business is profitable and growing.

However, for the purpose of making an accurate analysis, considering revenues means taking the following elements into consideration:

  • Revenue growth – Calculating the revenue growth can help determine whether your business finances stand. This can also help you figure out whether there’s an increase in the total revenues generated within a certain period of time.
  • Revenue concentration – It’s also crucial to take a look at your business’s revenue concentration when studying your finances. For instance, when a single customer is responsible for the high percentage of your revenues, then, you may deal with financial difficulties in the event they stop doing business with you. This is one reason why you should include this element in your financial analysis.
  • Revenue per employee – When computing the revenue ratio per employee, you also measure your company’s productivity. In most cases, having a higher ratio means your business is generating good amounts of revenue per employee.

As you can see, dealing with your company’s revenue when analysing finances can be a complicated feat. Unless you’re a professional, you may need the assistance of chartered accountants Nottingham , or from wherever you live, to help you with the process.

2. Profits

Another factor to keep in mind when analysing business finances is the profits. The difference between profits and revenues is that the former refers to the amount of income after accounting all the expenses, debts, operational costs, and many more, whereas the latter refers to the amount of income generated from the sales of goods or services as part of your business operations.

That’s why in addition to revenues, it’s also essential to consider your company’s profits when conducting a financial analysis. Realistically speaking, being unable to produce good amounts of profits means your business may not be able to thrive in the long run. So, to make sure you get an accurate analysis of your company’s finances, be sure to include relevant data on your gross profit margin, operating profit margin, and net profit margin.

3. Operational efficiency

When assessing your business finances, it’s also important to pay attention to your company’s operational efficiency or how well you’re utilizing the resources. In most cases, dealing with a lack of operational efficiency means your organization is generating smaller profits and experiencing weaker growth.

To know how efficient your business operations is, below are the components to consider:

  • Inventory turnover – This can show how your company manages the inventory. For example, if you have a high inventory turnover, it means your business is producing more sales.
  • Accounts receivables turnover – This can show how you can efficiently manage the credit you’re extending to the customers. When the numbers are higher, it means your business is doing good in terms of payment collections.

4. Liquidity

When analyzing your current business finances and other related matters, it’s also crucial to factor in the liquidity of your company. Your business is considered liquid when it has the ability to generate adequate cash to cover some cash expenses. But, if your company has poor liquidity, no amount of profit or revenue growth can compensate this financial problem.

That said, you should determine how liquid your business is to have a clear picture of its financial health. You can do this by considering your ability to pay interest expense from the cash you generated and your ability to pay off short-term obligations from cash and other assets.

Bottom line

Ideally, performing a financial analysis doesn’t need to be difficult if you know how to keep the factors mentioned above in mind. Remember, knowing where your business stands within the purview of financial health is important for its growth and survival.

How to analyze your current finances

When your family income drops suddenly or expenses unexpectedly increase, your first concern may be to pay your bills and meet your day-to-day expenses. You should also look at your total financial picture and determine whether there are assets you might use to meet family obligations.

Determining Your Net Worth

What financial assets do you have? How much do you owe? A net worth statement is a financial balance sheet, the total of your assets (what you own) minus your liabilities (what you owe). Preparing a net worth statement will help you assess your overall financial situation and make wise decisions.

Use the Net Worth Statement worksheet to determine your net worth. Date your worksheet so you can track changes in your net worth over time.

The asset column is divided into the following groups:

Cash — Those things that either are or can be easily converted to cash. Keep in mind that cashing in certificates of deposit (CDs) before they mature may result in an interest penalty.

Investments — Financial assets that can be cashed in or sold for their current market value. Prices will fluctuate with market conditions. Annuities may have surrender penalties. You may also owe income taxes and early distribution penalties on money taken from annuities.

Retirement Assets — Assets that are held in tax-advantaged retirement accounts, such as 401(k) plans, IRAs, and pensions. You will owe regular income tax on withdrawals from tax-deferred accounts, and withdrawals before age 59-1/2 usually involves an additional 10% penalty.

Personal Assets — Real estate and personal property that can be sold but usually not as quickly as other assets. Assets such as vehicles, furniture and appliances usually depreciate in value; so they are worth much less now than when you purchased them, even if they are still in good condition.

Calculate the value of your assets:

  • Write down the current amount in each account where you keep cash and liquid savings, such as checking, savings, and money market accounts; certificates of deposit (CDs); and money market funds.
  • If you have savings bonds that you have held for at least a year, use the calculator at to determine the current value or call a bank to find out the current value.
  • If you have a whole life policy (one that builds a cash value), find out the cash surrender value by checking your policy or calling your agent.
  • If you own stocks, bonds or mutual funds, check the current value on financial websites or use the value from your last statement.
  • Use the surrender value for annuities. For several years after purchase, the insurance company will charge a surrender fee if you withdraw the money.
  • Use the current value of your house or other real estate — not what you paid for it. You can also check sales prices of similar homes in your area on, or check with a real estate agent in your area.
  • Check a used vehicle guide (Blue Book) online at or through your local library, insurance agent or banker for the value of your cars and trucks.
  • To find out the value of your boat, camper, snowmobile or any other recreational vehicle, talk to a dealer who sells used recreational vehicles.
  • Make a conservative estimate what you could get if you sold household items and personal property today.
  • List the current value of your pension, IRAs or other retirement plan, using the amount you would get if you were to cash them in today.
  • List money others may owe you if you realistically expect to collect it.
  • Add any other types of assets such as a business, rental property, or royalties.

Calculate your liabilities:

  • The balance of the mortgage loan on your house may be on your monthly statement. If not, ask the lender for the outstanding balance. Also list any second mortgages or home equity loans.
  • Record the balance due on all credit cards, charge accounts, installment accounts and other loans. Be sure to list the total balance due, not just the monthly payment.
  • List any current or overdue bills you owe, including the dentist, utilities, telephone, and property taxes which are billed one year later and are owed even if you sell the home.

After you have totaled both your assets and your liabilities, subtract total liabilities from total assets. What’s left is your net worth.

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How to analyze your current finances

One of the best ways to get a good idea of where you stand (in just about anything) is to run a SWOT Analysis.

A SWOT Analysis is a strategic management tool that is often used in business to analyze a company, process, system, business opportunity, etc. But a SWOT Analysis can help you analyze other situations as well, including your financial situation, career, and more.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

Running a basic SWOT Analysis is a good way to understand your current situation and help you create a plan that will account for weaknesses and threats and enable you to leverage your strengths and opportunities to help you reach your goals.

Example SWOT Matrix:

How to analyze your current finances

How to run a SWOT Analysis on your personal finances

Before you jump in, it’s important to define your financial goals; hopefully, you did that as part of your financial mission statement. If not, now is as good a time as any. Defined goals are essential to measure progress and ensure you stay on the right path.

Once you have your goals and have started working on your financial plan, then you should take the time to run a SWOT Analysis to determine your areas for improvement and make sure you don’t start moving in the wrong direction.

When doing the following exercise, consider Strengths and Weaknesses to be internal conditions and Opportunities and Threats to be external possibilities.

Note: This exercise does not need to take long; look at it as a brainstorming session and write down any and all possibilities that you come up with. You can reorganize them or scratch them from the list later. This exercise is also more helpful if you are tracking your income with a tool such as Quicken or a similar app, or an online money management tool.

Determine Financial Strengths

Look back at your financial mission statement and assess your current financial position to determine where you are strong and where you can stand to make improvements.

A financial strength can be anything that positively reinforces your current financial situation or helps you get closer to achieving the goals you made in your financial mission statement. Areas to examine closely include not only income and debt but positive monthly cash flow, too.

Helpful questions: What are the strong areas of your finances? Do you have positive monthly cash flow? Are you paying extra on your debts? Are you debt free? Did your income recently increase?

Determine Financial Weaknesses

What is holding you back from reaching your financial goals? It could be debt, a lack of income or earning potential, or something else. Ask yourself these, and similar questions: Have you maxed out your income potential in your current job? Are you in debt? Are you upside down on a car or house loan? Are you living paycheck to paycheck?

Determine Financial Opportunities

Opportunities are actions that you haven’t yet taken, or at least haven’t yet maximized. There are almost always opportunities if you look for them, though sometimes they may not appear evident at first glance.

Financial opportunities come in many flavors, including income opportunities, debt reduction, investments, reducing interest or fees, and more.

Example for income opportunities: Do you have a skill you can leverage into a paying gig, such as consulting, tax preparation, freelance writing? Do you have any hobbies that might bring in revenue? Some examples include arts & crafts, refereeing youth sports, writing, landscaping, woodworking, and more. Can you get a promotion at work or volunteer to work extra hours for overtime? What about investment opportunities?

Other financial opportunities: Opportunities aren’t just limited to more work, earning a promotion, or earning more money, it could also be selling items on eBay or Craigslist, reducing your debt with a o% balance transfer or debt consolidation, eliminating exposure to poor investments, reducing investment fees, downsizing your house, buying a more fuel efficient car, etc.

Determine Financial Threats

You also need to list and address factors that threaten your financial situation. The economy often has a direct effect on the job market and housing prices and can often be a financial threat.

Remember threats are external forces that you may not always be able to control. They key isn’t being able to control or eliminate each external factor (that would be impossible).

The idea is to mitigate potential losses or external threats as much as possible. Because external factors aren’t always preventable, the idea is to create contingency plans to help you deal with unforeseen events.

Some ideas to consider are a diversified investment portfolio or multiple income streams.

External factors to consider: Are you in danger of losing your job? Is your mortgage rate about to reset to a higher APR? What are the current economic factors that may affect your job/investments/income streams?

What to do with the SWOT Analysis

Running a SWOT Analysis is only half the battle; by itself, a SWOT Analysis doesn’t accomplish anything. You need to use the SWOT Analysis to help improve your financial/career/business situation to better handle internal and external factors that could affect you.

The key is finding a way to leverage your strengths and opportunities and mitigate weaknesses and threats to solidify your financial health, or even better, turn weaknesses and threats into strengths and opportunities.

The current ratio is a critical liquidity ratio utilized extensively by banks and other financing institutions while extending loans to businesses. “How to improve the current ratio?” is a general question that keeps hitting the entrepreneur’s mind now and then. For improving the current ratio, the management needs to focus on various strategies, including its current liabilities and assets, which are not one-time activities. The company has to monitor it throughout the year.

Current Ratio in Brief

The current ratio is a figure that results from dividing current assets by the current liabilities. This figure is important because it measures the liquidity stand of a firm. Normally, the assumption is that the higher the ratio, the higher is the liquidity, and vice versa. It would be unfair to conclude the liquidity based on the ratio. Without further knowing what makes this ratio, it isn’t easy to form an opinion. We can understand it better with the help of the following situation:


  1. Normally, a dipping sale would increase the level of inventories. We cannot settle the claims of creditors with inventory; it would require hard cash. Undoubtedly, the ratio, in this case, is increasing but without improving the liquidity.
  2. Secondly, delayed payments by customers will increase the debtor’s level and eventually the current assets and, therefore, the current ratio. Here also, we can see the increase in the current ratio but a decline in the actual level of liquidity.

How to analyze your current finances

With the help of the above example, let us understand better, a current ratio of 1:1 is not sufficient because all the current assets are not readily convertible into cash. There is always a requirement for a cushion over and above 1. This cushion is technically called “Margin of Safety.” In other words, current assets over and above the current liabilities are the margin of safety. We need marginal current assets simply as all the current assets can quickly liquidate to cash.

Refer to CURRENT RATIO for details.

How to Improve the Current Ratio?

Faster Conversion Cycle of Debtors or Accounts Receivables

Faster rolling of money via debtors will keep the current ratio in control. At least, the ratio will show the correct picture if the debtors are liquid. A constant follow-up with the debtors can improve the collections from them. The payment terms should be clear in the first dealing itself, and the negotiated credit period should be as low as possible.

Pay off Current Liabilities

Not only does the current ratio depend on current assets, but it is also equally dependent on the current liability, which is the denominator. They should pay off as often and as early as possible. It would decrease the level of current liabilities and, therefore, improve the current ratio. Early payments to creditors can save interest costs and earn discounts, directly impacting the firm’s profits.

Sell-off Unproductive Assets

The cash level can also increase by selling unused fixed assets. Otherwise, the money unnecessarily gets blocked into them, and idle cash accrues interest costs.

How to analyze your current finances

Improve Current Assets by Rising Shareholder’s Funds

When the current assets are financed by equity rather than the creditors, the level of current assets will increase with current liabilities remaining the same. Consequently, this exercise will improve the current ratio. Considering the improvement of the current ratio, drawings are not advisable. It is because drawings would reduce capital investment in the current assets. And therefore, the level of current liabilities will increase to finance the current asset. All this directly impacts the current ratio. In essence, owners’ funds, i.e., capital and reserves, and surpluses should remain invested in the firm to balance the current ratio.

Sweep Bank Accounts

First of all, the firm’s management should always try to cut down on challenging cash levels and keep the money in bank accounts. The sweeping facility should be available in the bank accounts, which almost every bank and financial institution provide. Sweeping is a facility by which the excess funds from the current account are transferred to another account that fetches interest on that fund. At the same time, these funds are available to use when required.

Our conversation above is mainly focusing on analyzing and improving the current ratio. Normally, the rule for this ratio is “higher the better.” It would be pretty interesting to know that in certain situations, it is advisable to reduce the current ratio.

Every dollar you spend should deliver returns so you can grow your business, pay your employees and still make a profit. But how can you be sure that’s the case?

According to Stéphanie Bourret, Manager, Technologies Group at BDC, your bank account alone tells only part of the story.

“You need objective ways to measure the performance of your business,” she says. “Financial ratios give you that.”

Financial ratios are calculations based on the information in your financial statements. Bourret lists a few key ratios every business owner should track:

    and gross margin tell you how much profit you are making
  • Working capital (also known as current ratio) is a good indicator of how easily you can pay off existing debt and if you have the cash flow needed to expand your business
  • Receivable turnover is a measure of business activity and liquidity (how easily you can convert your assets to cash) tells you how fast your goods are selling, which is an indicator of market demand

How do you use these ratios to fine-tune your business? Bourret offers these four tips for entrepreneurs.

1. Determine which ratios are relevant to you

Every ratio gives you a different kind of insight into your business. How you use them depends on your particular goals.

If you’re looking to grow and need to raise capital, for example, your net profit margin will be key. “The more profit you can show, the better your chances are of raising the cash you need,” she says.

On the other hand, if you’ve launched a new product, you’ll want to track your inventory turnover to make sure you’re aligned with demand. “You want to see that the inventory you keep isn’t old news, that people want to buy the product,” she says.

Manager, Technologies Group at BDC

Some ratios are important to specific industries. For example, occupancy ratio is used in the hotel sector, capital adequacy ratio in banking and sales per square foot in retail. The customer lifetime value to customer acquisition cost (CAC) ratio is often used in the tech sector, especially by software as a service (SaaS) entrepreneurs. It’s important to know which ratios give information relevant to your sector.

2. Keep track over time

Once you’ve determined which ratios to use, compare the results over time to pick out trends or changes in your business performance. If your net profit margin climbed regularly for three years and then took a dip, what changed?

  • Were your revenues down in one quarter?
  • Have your costs gone up?
  • Do you need to take any actions?

3. Benchmark your business

You also need to know how your business compares to others in your industry. With ratios, there is no “magic number” a business should strive for—every company and every industry is different.

Knowing the industry average, however, gives you a general sense of where you want to be. Average ratios are also available for complete sectors and companies of comparable size. Use these as benchmarks to see how you stack up next to the competition and to set realistic improvement goals.

4. Use ratios to drive strategy

The insights that come from the ratios you use should shape the direction of your business plan. “Status quo can kill the potential of a business,” says Bourret. “You always want to be adapting and innovating, and ratios can help you do that.”

For example, if you’re not turning over your receivables fast enough, you may have a cash flow problem. You can address that by changing your procedures or company culture to collect payments more proactively. Or if you see your inventory is turning over too slowly, maybe you need to look at your product mix and either add something new or get rid of something old.

Bourret says ratios are a major part of your profit-making arsenal. “Use them right and you end up with more money in your pocket.” If you’re not sure which ones are right for your business, or how to use them, get advice from your accountant or a BDC business advisor. An expert can help you zero in on where you need to focus your efforts.

How to analyze your current finances

Everyone with even a little bit of debt has to manage their debt. If you just have a little debt, you have to keep up your payments and make sure it doesn’t get out of control. On the other hand, when you have a large amount of debt, you have to put more effort into paying off your debt while juggling payments on the debts you’re not currently paying.

Know How Much You Owe

Make a list of your debts, including the creditor, total amount of the debt, monthly payment, interest rate, and due date. You can use your credit report to confirm the debts on your list. Having all the debts in front of you will allow you to see the bigger picture and stay aware of your complete debt picture. Debt reduction software can make this process easier.

Once you have a handle on your debt and your income, you can calculate your Debt to Income ratio (DTI). This ratio tells you how much of your income is going toward debt payments. To find yours, divide your debt payments by your income, and multiply by 100. For example, $1,200 of monthly debt divided by $3,000 of monthly income is 0.4 x 100 = 40%. The lower this number is, the better, and tracking it can help you understand your finances more clearly.

Don't just create your list and forget about it. Refer to your debt list periodically, especially as you pay bills. Update your list every few months as the total amount of your debt changes.

Pay Your Bills on Time Each Month

Late payments make it harder to pay off your debt since you’ll have to pay a late fee for every payment you miss. If you miss two payments in a row, your interest rate and finance charges will increase.

If you use a calendaring system on your computer or smartphone, enter your payments there and set an alert to remind you several days before your payment is due. If you miss a payment, don’t wait until the next due date to send your payment, by then it could be reported to a credit bureau. Instead, send your payment as soon as you remember that it was missed.

A budget can help you stay out of debt, and it can help you climb out. It allows you to see how much money you earn and where that money is going. Create a bare-bones budget that allows you to pay for necessities like your rent or mortgage and utilities. Set aside everything else to pay off your debt as quickly as possible.

Create a Monthly Bill Payment Calendar

Use a bill payment calendar to help you figure out which bills to pay with which paycheck. On your calendar, write each bill’s payment amount next to the due date. Then, fill in the date of each paycheck. If you get paid on the same days every month—the 1st and 15th—you can use the same calendar from month to month. But, if your paychecks fall on different days of the month, you’ll need to create a calendar every month.

Make at Least the Minimum Payment

If you can’t afford to pay anything more, at least make the minimum payment. Of course, the minimum payment doesn’t help you make real progress in paying off your debt. But, it keeps your account in good standing, which avoids late fees. When you miss payments, it becomes harder to catch up and eventually your accounts could go into default.

While you're working on paying down debt, stop using credit cards. Start carrying cash instead. Stick to the budget you created and only buy what you can pay for with cash.

Decide Which Debts to Pay Off First

Paying off credit card debt first is often the best strategy because credit cards have higher interest rates than other debts. Of all your credit cards, the one with the highest interest rate usually gets priority on repayment because it’s costing the most money.

Use your debt list to prioritize and rank your debts in the order you want to pay them off. You can also choose to pay off the debt with the lowest balance first. This might cost a little more in the long run, but knocking off small debts first can build confidence.

Pay Off Collections and Charge-Offs

You can only pay as much on your debt as you can afford. When you have limited funds for repaying debt, focus on keeping your other accounts in good standing. Don’t sacrifice your positive accounts for those that have already affected your credit. Instead, pay those past due accounts when you can afford to do it.

Build an Emergency Fund to Fall Back On

Without access to savings, you’d have to go into debt to cover an emergency expense. Even a small emergency fund will cover little expenses that come up every once in a while.

First, work toward creating a small emergency fund—$1,000 is a good place to start. Once you have that, make it your goal to create a bigger fund, like $2,000. Eventually, you want to build up a reserve of three to six months of living expenses.

Don’t Confuse Wants and Needs

It's easy to convince yourself that you "need" to purchase a new tv or that you "need" to go on vacation. The truth is, there aren't that many true needs in life. You need food, shelter, clothing, transportation, and things like that. You want steak, a nice house in the suburbs, designer labels, and a luxury car, for example.

Recognize the Signs That You Need Help

If you find it hard to pay your debt and other bills each month, you may need to seek outside help, like a credit counseling agency. Other options for debt relief are:

These each have advantages and disadvantages, so weigh your options carefully.

Frequently Asked Questions (FAQs)

What is debt consolidation?

Debt consolidation is rolling your debts into a product that offers a single payment and a lower interest rate. Popular debt consolidation tools include personal loans and 0% interest balance-transfer credit cards.

What is debt settlement?

Debt settlement is when you negotiate with a creditor to settle your debt for less than you owe. Creditors will typically only settle debt that isn't current. If you stop making payments in order to settle debt, your credit score will drop due to the missed payments. You can hire debt settlement companies, but they charge fees for resolving your debt. You can settle debt on your own or consider another option like credit counseling.

You can use financial ratios and calculations to monitor the health of your business. These help you to identify potential problems early on and make changes.

Ratios vary from industry to industry. Compare your ratio to a benchmark value for similar industries to get a realistic idea of how your business is going.

Learn about small business benchmarks on the Australian Taxation Office (ATO) website.

Below are some of the main ratios and calculations to help you monitor your business. If you aren’t confident working these out, check the figures with your accountant or talk to a business adviser.

Connect with a business adviser or expert for guidance and support

Expertise and advice finder

Sales calculations

Break-even analysis

This break-even formula tells you how much you need to sell to break even. Above your break-even point your business will start making a profit. Analysing your break-even point helps you set sales goals and better manage your inventory.

Break-even point = total fixed costs/(average price of each product/service – average cost of each product/service to make or deliver).


A margin shows you how much of each sale is profit (as a percentage). It helps you make budgeting and pricing decisions. Lenders and investors use your margin to decide if you’re a good candidate for finance.

Margin = ((sales – cost of goods sold)/sales) x 100

Mark up

A mark up is the percentage you add to the cost price of goods, to get your selling price. Use mark up to choose a price that isn’t too high or low for your products or services. When calculating your mark up, it’s useful to consider your margin percentage as a starting point.

Mark up = ((sales – cost of goods sold)/cost of goods sold) x 100

Margin versus mark up

These are often confused, but it’s important you know the difference. If you confuse mark up and margin, you could seriously undervalue your products or services. You’d risk not making enough profit to cover your costs.

The easiest way to work out the difference is by calculating both figures. The mark up percentage is always higher than the margin.

Example of mark up versus margin

Mark sells a product for $15 which cost him $10 to produce. Mark wants to know what percentage of his product is profit (margin) and what percentage is mark up.

Margin = (($15 – $10)/$15) x 100 = 33%

Mark up = (($15 – $10)/$10) x 100 = 50%

So, while Mark has a mark up of 50%, his margin (profit) is only 33%.

Note: in this simplified example we use gross profit figures. This doesn’t account for the overall expenses of the business.

Mark down

A mark down is the percentage discount on a product. You’d generally use a markdown in a promotion or sale to:

  • attract sales, or
  • move extra or discontinued stock

Mark down price = original price – (original price x markdown)

Example of markdown price

Mary wants to shift her least profitable stock. She decides to sell her goods at half price.

Mark down price = $20 – ($20 x 50%) = $10.

Commonly used financial ratios

The most common types of ratios are:

  • profitability ratios – to measure business performance
  • liquidity ratios – to work out how solvent your business is
  • financing ratios – to evaluate financing and investment
  • turnover (efficiency) – to analyse stock turnover and cash flow

Profit ratios

Gross profit margin ratio

This shows you the proportion of profit for every sales dollar before expenses. An acceptable gross profit margin ratio varies from industry to industry. In general, the higher the margin the better.

Gross profit margin = gross profit/sales : 1.0

Net profit margin ratio

This shows the proportion of profit for every sales dollar after expenses. An acceptable net profit margin ratio varies from industry to industry, but generally, the higher the margin the better.

Net profit margin = net profit/sales : 1.0

Gross profit versus net profit

You can easily see the difference between your gross profit and net profit on your profit and loss statement. Your gross profit is your sales minus your cost of goods sold, but does not factor in your business operating expenses. Net profit is a better indication of profit, as it factors in your operating expenses.

Example of gross profit versus net profit

During May, Jeff sells 30 products at $15 each. Each product costs him $10 to produce. His overall operating costs for the month are $80. Jeff’s gross and net profits for the month are as follows:

Sales = $450, cost of goods = $300

Gross profit = sales – cost of goods = $450 – $300 = $150

Net profit = gross profit – operating costs = $150 – $80 = $70

Find out how to set up your profit and loss statement.

Return on investment (ROI)

ROI shows how efficient your business is at generating profit from the original investment (equity) from owners or shareholders. Lenders will also use your ROI to help them determine the financial strength of your business.

ROI = net profit/owner’s equity

Liquidity ratios

Current ratio or working capital ratio

The current ratio works out your business’ liquidity. This is how quickly you can convert assets into cash to pay your current bills or liabilities. This ratio is a good measure of the financial strength of your business.

For example, a ratio of 1:1 means you have no working capital left after paying bills. So generally, the higher the ratio, the better off your business will be. Lenders will also use your current ratio to help them determine your capacity to repay a potential loan.

Current ratio = current assets/current liabilities : 1.0

Quick ratio

The quick ratio or acid test ratio is similar to current ratio except it excludes inventory (which can be slow moving). This is a much more conservative measure of liquidity. A ratio of 1:1 means you have no working capital left after paying bills. So generally, the higher the ratio, the better off your business will be. Lenders will use your quick ratio to help them determine your capacity to repay a loan.

Quick ratio = (current assets – inventory)/current liabilities : 1.0

How to analyze your current finances

Investors use a variety of factors to decide whether to buy, sell or hold a stock. In addition to risk, the other key factor investors use is financial performance. Using a variety of objective ratios to make a financial performance evaluation, you can eliminate some of the guesswork when looking at individual businesses and deciding if they are right for your portfolio.

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What is Financial Performance?

According to the Corporate Finance Institute, financial performance, as it applies to an individual business, refers to where a company stands in terms of its:

  • Assets
  • Liabilities
  • Equity
  • Revenue
  • Profitability

This list does not measure the company’s risk, which is measured by factors such as debt-to-equity, earnings before interest, taxes, amortization, debt capacity and interest coverage ratio. Investors look at the combination of the company’s financial performance and risk as to the best financial metrics for evaluating a company’s health.

Important accounting ratios, looking at factors such as liquidity, efficiency, leverage and inventory turnover, are some of the best financial ratios for investors to use to evaluate financial performance.

The Company’s Liquidity Ratio

Liquidity refers to cash and other assets you can quickly use to pay bills and debt. If you have an asset that would take months to sell, that’s not a very liquid asset. If you have receivables or inventory you can discount and use to bring in cash almost immediately, that asset is more liquid. Using quick ratios and current ratios, a company determines how much capital it would have to meet immediate or short-term capital needs.

It is important that you identify and appreciate what you consider to be your skills, abilities and personal qualities. Only when you do this can you then confidently demonstrate these on your CV and be able to market yourself effectively to potential employers.

An added advantage of assessing yourself is that you will be able to identify your weaknesses, and thereby plan to improve and upgrade them.

Being able to communicate your work experience and knowledge to an employer and also match their requirements is vital for successful job hunting. By using a little time and effort to assess yourself it will be easier later on for you to match and demonstrate your abilities to the needs of recruiters.

How to show your skills in a CV

What is a skill
A skill is something that you are good at doing, it could come naturally to you or be something you have learnt through experience or training. Having the right skills can go along way to helping you get the job you want.

How to assess your skills
Start off by creating a list on a piece of paper of what you believe you are good at. Do this by reviewing your current and previous jobs and listing particular career skills you have gained, put them under different topics headings.

List what you have achieved to date and those points you feel you did well in and can demonstrate, give examples of and also prove.

Your qualifications and training
List in detail all of the training and qualifications that you have gained. Academic qualifications are a demonstration of your abilities and there a asset that can help you when applying for jobs.

Job related skills
These are pretty self explanatory, if you have a skill that is related to the job you are after then highlight it. A very simple example of this would be if you were a experienced architect and was going to apply for a architects vacancy.

Specialist skills
If you are a specialist on one particular or have a particular expertise then focus on that.

Generalist skills
These are qualities that most people could have, but which you could mention to show yours are better than others. A good example of this would be communication skills, for instance if you were a architect you could say you:-

  • Having the ability to relay technical data to non technical work colleagues.

Other generalist skills sets could be:-

  • Problem solving.
  • Critical thinking.
  • Able to work as part of a team.
  • Ability to promote change.
  • Organisational skills.
  • Able to develop ideas.

For instance if you are a sales person then you would create a heading under ‘sales skills’. Then under this you would review all of the sales jobs you’ve had in your career and the different products or services you have sold. So if you were employed in Company A selling car insurance, then you would list ‘car insurance sales’ as one of your strengths.

Identifying the skills a employer wants
Look at the job advert and read it carefully, look for keywords that describe the skills and capabilities that a employer is expecting from a applicant. Then build and develop your CV or covering letter around the relevant skills that are required and highlight them in your CV. If in your resume you can demonstrate to a employer that you have the qualities and capabilities they are looking for then you have a good chance of being successful in your application.

Transferable skills
These are skills in one particular work environment that you can take with you from one employer to another. For instance if your are a motor mechanic and work in a garage then you can get a job in another garage and of course you will take your skills with you. So you have in effect transferred them from one workplace to another one. Below are a list of some transferable skills:

SWOT analysis is a strategic planning tool used to identify the Strengths, Weaknesses, Opportunities, and Threats affecting a business. An interesting variation on SWOT analysis is the financial SWOT analysis, which provides insight into those same four areas, but with a financial focus. In this article, we’ll look at the basics of financial SWOT analysis, including what it is, when to use it, and how to use it!

What Is Financial SWOT Analysis?

Financial SWOT analysis is a business analysis tool that helps to identify the financial Strengths, Weaknesses, Opportunities, and Threats of an organization. It’s an adaptation of SWOT analysis — which analyzes those same traits without a financial focus — commonly used in financial planning.

Let’s look at the four areas of SWOT analysis in depth:

  • Strengths: These are things that play to a business’ benefit. In the case of financial SWOT analysis, this may include large cash reserves or positive monthly cash flow.
  • Weaknesses: These are things that play to a business’ detriment. For financial SWOT analysis, examples include lots of debt or negative monthly cash flow.
  • Opportunities: These are things which could benefit the business, but do not currently. Financial examples include possible cash investments or new revenue streams.
  • Threats: These are things which could disadvantage the business, but do not currently. Examples of financial SWOT analysis include non-paying customers or interest rate hikes.

Financial SWOT analysis is designed to give an overall picture of an organization’s current and potential financial standings. It helps to understand how an organization is faring financially at present (thanks to the Strengths and Weaknesses identified), and offers insight into potential events that might dramatically change its finances (the Opportunities and Threats). This can help an organization to plan both financially in accordance to international tax laws, by knowing what revenues and expenses to expect, and strategically, in knowing how to pivot to optimize its financial standings.

When to Use Financial SWOT Analysis

Like other business analysis tools, financial SWOT analysis can be used at any stage before or during a business venture. For example, companies might use financial SWOT analysis to evaluate a new business opportunity, with the goal of identifying what the associated benefits and risks are from a financial perspective. On the other hand, companies could use financial SWOT analysis to evaluate their current financial standings and any eminent Opportunities and Threats, so as to optimize their business plan for the future.

How to Use Financial SWOT Analysis

Conducting a financial SWOT analysis is just like conducting any other SWOT analysis. This means the bulk of the work lies in identifying relevant Strengths, Weaknesses, Opportunities, and Threats.

Identifying Strengths, Weaknesses, Opportunities, and Threats

It’s usually easiest to start with the Strengths and Weaknesses, since these represent the current standings of the business. For a financial SWOT analysis, Strengths and Weaknesses can often be found by looking at balance sheets, which show revenues and expenses. This will allow you to determine whether the business has a positive or negative cash flow, which can be a major Strength or Weakness.

Other financial Strengths and Weaknesses to look at include assets, liabilities, and the availability of borrowed money. In particular, it is useful to identify whether the business can easily borrow money, and at what interest rates.

Next, financial SWOT analysis involves identifying the Opportunities and Threats that could affect the business. This requires more creativity, since it involves looking at the surrounding business environment and visualizing a practically infinite number of ways the business could be affected (whereas Strengths and Weaknesses can be identified by working inside-out).

In financial SWOT analyses, the major Opportunities are new revenue streams. The Ansoff Matrix can be a useful tool to identify new revenue streams, as it breaks them down into four different types, based on the level of market and/or product development required.

Major Threats might be the loss of existing revenue streams. To identify these, it can help to use business analysis tools that identify external variables, such as PESTLE analysis. PESTLE analysis looks at Political, Economic, Sociocultural, Technological, Legal, and Environmental factors that might affect a business. This comprehensive framework makes it much easier to spot ways in which the business could be harmed.

Piecing Together the Puzzle

Once you’ve identified the factors that could affect the business, it’s time to compile, and subsequently interpret the SWOT analysis. In compiling a SWOT analysis, review the Strengths, Weaknesses, Opportunities, and Threats identified and ensure they are sufficiently significant. It’s impossible to cover everything in a single analysis, so aim to focus on the most important issues.

After laying out and reviewing factors from these four areas, decide whether a report is necessary. If the SWOT analysis is to be shared with others, it may be worth compiling all the findings into a single document. If not, whatever notes made will be sufficient.

Finally, begin interpreting the SWOT analysis in order to develop actionable strategies. For example, look at the Strengths identified and determine whether additional work is necessary to maintain them. Then, consider how any Weaknesses might be resolved or worked around. Similarly, look at how Opportunities can be grasped and Threats avoided.

While SWOT analysis is useful in its own right — as a framework to identify current standings and potential future scenarios — its true value is in enabling you to find these actionable insights. As a result, conduct a SWOT analysis, but be sure to leave adequate time to pick out these insights and create actionable strategies. Knowing certainly is half the battle, but acting on that knowledge is the crucial second half!


As you can see, financial SWOT analysis is a powerful tool for evaluating the financial standings of a business. By combining the SWOT framework of Strengths, Weaknesses, Opportunities, and Threats with a financial focus, this tool uncovers both current financial standings and potential changes. As a result, it’s an invaluable tool for analyzing business operations for both financial and strategic reasons.

You can now easily manage your finances with Ledger Mode in Emacs. Learn how.

How to analyze your current finances

Ledger Mode is a package in Emacs for the command line accounting program Ledger. This allows Emacs users to utilize Ledger’s powerful features from the comfort of their favorite text editor.


Also read: What Is Doom Emacs and How to Install It

Why Use Ledger Mode and Do Your Bookkeeping in Emacs?

Ledger Mode is simple and intuitive to use. It automatically balances your finances and notifies you when there is any issue with your records. It also allows you to categorize your expenses and sources of income which could, then, be sorted and analyzed from the package itself.

How to analyze your current finances

Simply put, Ledger Mode is a brilliant addition for someone that uses Emacs as their productivity suite. It removes the need for spreadsheets while also allowing you to use the ledger data in the other parts of your Emacs experience.

Emacs works in the idea of interoperability. This means that any data produced in Emacs can be repurposed to any other package within it. In that, Ledger Mode allows its users to create and combine the data you have written for ledger to other tools in Emacs.

How to analyze your current finances

This allows you, for example, to create Org Mode documents that link to both archived emails and ledger files. Not only that, you can also easily copy your ledger entries to your emails and vice versa. This is all because entries in Ledger Mode are plain text and Emacs can easily move that to any buffer.

How to analyze your current finances

Also read: How to Use Email within Emacs

The Ledger Utility

As discussed above, Emacs’ Ledger Mode is just a way to access the Ledger command line utility. With that, it is important to know what the Ledger program is and what it can do out of the box.

How Ledger Works

Ledger is a simple program that reads plain text ledgers and create accounting reports out of them. Unlike traditional bookkeeping programs, it does not create and modify any database files. This makes Ledger a lean and flexible solution for keeping tabs on your financial status.

How to analyze your current finances

The way Ledger makes this possible is that it expects each entry in the file to follow a specific format. Consider the following the example:

In here, Ledger expects three things from the plain text file:

  • A title line that specifies a date and a name for the book entry. In this case, I added an Expenses entry on February 16.
  • A group of accounts that shows where the money came from and where it went. In this case, I used my cash asset and I moved it to an expenses account.
  • The value of money that I moved. In here, I moved my cash asset twice for my lunch and snack. However, it was all taken at once from my assets at the end of the day.

These three basic assumptions make it such that you can easily adapt Ledger to any kind of situation. For example, Ledger can deal with both currency and commodities. This makes it useful for people who are not only tracking their spending habits but also track their investments.

Also read: How to Use Emacs for RSS with Elfeed

Defining Account Categories in Ledger

One important thing to note is that the categories for each transaction in Ledger is completely arbitrary. However, the general practice of tracking personal finances can be divided into five parts:

  • TheAssets account are the commodities and currencies that you own. This could either be a single currency or a mixture of currencies, stocks and item inventories.
  • TheExpenses account are the commodities that you have purchased for with your assets.
  • TheIncome account is where you can pull money from your sources of wealth. For example, you can attach the salary that you receive under this account.
  • TheLiabilities account is where you can assign all the commodities that you currently owe.
  • TheEquity account is a special account that you can use to determine your current net worth. This is commonly used when creating an opening balance in Ledger.

You can further specify a transaction by appending a colon (:) after each of those five categories. For example, a transaction with the label Expenses:Food:Lunch can be represented by a three level hierarchy.

How to analyze your current finances

Also read: 5 Hidden Features You Can Use to Improve Emacs

Installing Ledger

With that in mind, installing Ledger is simple. You can find it in the repositories of most Linux distributions. For example, you can install ledger in Debian and Ubuntu using apt:

In these modern times — when there literally is an app for everything — it has never been easier to track your money and stay on budget. It’s a snap to automate payments. It’s easy to set and track financial goals. You should never miss a bill payment.

Here are our choices for the best personal finance apps.

Acorns App

Cost: $1-$5/month

Where It’s Available: IOS, Android, Web

At A Glance

Acorns is an automated savings tool that rounds up your purchases on linked credit or debit cards, then sweeps the change into a computer-managed investment portfolio. Picture it as a virtual piggy bank.

The target audiences for Acorns include college students, non-involved investors and people who struggle to save money.

In seeking young, would-be investors, Acorns goes after college students, especially those who don’t have earned income and can’t yet contribute to tax-advantaged retirement accounts.

After four years of “rounding up,’’ there’s usually a nice sum of money looking for a new home. It could be the seed money for your first investment!

You are given the option of transferring your change into an investment portfolio, either automatically or manually (where you can review each purchase on the app, then select which ones to transfer).

Acorns also has several partners — such as Jet, Blue Apron, Airbnb, Boxed and Hulu — that offer 10% cash back when using a linked payment method with them.

Of course, unlike the IRA or 401(k) accounts, Acorns offers only individual taxable accounts. Found money is one thing. Free money — such as an employer match — is quite another. So don’t put all your acorns in one basket — or something like that.

Acorns speaks well to new investors through Grow Magazine, an online personal finance site that is geared toward millennials. It offers advice about side gigs, credit-card debt, student loans and other pertinent topics. Much of the Grow content is incorporated in the Acorns app.


The app and Web site are encrypted. Automatic logout, IDs and other security measures are employed.

Pocket Guard

Cost: Free, $4.99/month, $34.99/year

Where It’s Available: iOS, Android

At a Glance

This app budgets how much spendable money you have after accounting for the basics like bills, debt, and long-term financial goals.

PocketGuard offers tools that simplify your income and expenses, allowing you to take command of your budget and even grow your savings account. It lets you link all your accounts in one place for a comprehensive view of your balances and net worth. After creating a profile and filling out some personal information, PocketGuard can send you offers for lower rates on financial services. The products are tailored to your interest based on your past transactions.

These days, so much of our transactions are handled digitally, which means it can be hard to tell how much money you really have available to spend. This confusion can lead to overdraft or late fees and inhibits us from optimizing our finances to our advantage. PocketGuard helps you stay aware of your current and future financial outlook. It even displays attractive graphs that make it easy to isolate the categories where you overspend. You can also customize the categories or personalize them with hashtags. The free version should work for those looking for an easy way to keep track of their spending. The premium version offers more in-depth customization and detailed reports.


Your data is secured with 256-bit SSL encryption–the same level of security as major banks. The PocketGuard app uses PIN code and biometrics, as an additional security layer, in case your phone is ever lost or stolen.

Mint App

Cost: Free

Where It’s Available: iOS, Android, Web

At a Glance

Mint is speedy and reliable, offering detailed and in-depth views of U.S. and Canadian personal-finance situations. It has a useful, clean design. You can sign up through the mobile app or the website (

Mint analyzes your spending habits, income, and other financial transactions through customizable alerts. If you tap on the plus sign and choose “Create Budget,’’ you are taken to a page with a list of spending categories (such as groceries or movies). It suggests a monthly spending limit based on your history, while also tracking your money through a few months of historical data. There’s a look at your monthly budget through a simple line graph, so there is a short-term and long-term perspective.

It isn’t an app for accounting software or reconciling transactions; it’s more about spending and big-picture financial status. Mint can calculate your net worth, but also offer detailed analysis of your spending habits. If you’re looking to set financial goals — such as escaping credit-card debt or purchasing a home — it’s good for that, too.

It will send push notifications for bills. If you’re close to the budget limit in your given categories – too many lattes this week? – you will get a warning.
Mint is supported by advertising, but the ads are more useful than annoying. Because of Mint’s all-knowing, all-seeing approach to your financial accounts, it knows precisely how much interest you’re earning and how much interest you’re paying on your mortgage, loans, credit cards and savings accounts, along with ATM fees and annual service charges.


When providing access to your online banking and credit card accounts, you are only giving Mint read access to that information. Mint doesn’t have the ability to move money, so if a hacker broke through, they wouldn’t have access to your cash. You can add a passcode to the app, a four-digit PIN, but it locks you out of Mint when navigating away from the app, so you won’t accidentally leave the app open for someone else to use. Combined with your iPhone passcode, that should be added security.

Creating a budget is a great way to track spending and get your finances in order. Here's how you can accomplish this important task and achieve your financial goals.

How to analyze your current finances

Creating a budget is a great way to track where your money goes each month and an important step to getting your finances in order. A budget can make it easier for you to achieve financial milestones, such as building an emergency fund or saving for a down payment on a home.

While the task may seem daunting, it's not that difficult to create a budget. Plus once you have one, the bulk of the work is done and you can make minor tweaks as your spending habits or income change. There are many websites and budgeting apps that you can use to get started, or you can create your own spreadsheet.

Below, CNBC Select reviews how to create a budget using a spreadsheet, but many of the steps are the same as other budgeting methods. Feel free to get creative with it — you can download templates online through Google Sheets, Microsoft Excel and other sites or start from scratch.

Here's how to create a budget in five steps.

How to create a budget

1. Calculate your net income

The first step is to find out how much money you make each month. You'll want to calculate your net income, which is the amount of money you earn less taxes.

If you receive a regular paycheck through your employer, regardless if you're part-time or full-time, the amount listed is likely your net income.

Keep in mind that if you're enrolled in a health insurance plan, flexible spending account (FSA) and/or a retirement account through your employer, the money is often automatically withdrawn from your paycheck. You'll want to subtract those deductions to make sure you have a clear picture of your take-home pay.

If you freelance, are self employed or simply don't receive a regular paycheck, you'll need to subtract taxes from your income amount. The self-employment tax rate is 15.3%, according to the IRS. You can use this TaxAct calculator to estimate how much taxes you're required to pay in a year. Then you can divide by 12 to get a monthly estimate.

2. List monthly expenses

Next, you'll want to put together a list of your monthly expenses.

Here are some common expenses:

  • Rent or mortgage payments
  • Loan payments (such as student, auto and personal)
  • Insurance (such as health, home and auto)
  • Utilities (such as electricity, water and gas)
  • Phone, internet, cable and monthly streaming subscriptions
  • Child care
  • Transportation (such as, gas, train tickets and bus fares)
  • Household goods
  • Miscellaneous (such as, gifts, entertainment and apparel)

It's also good to include details on how much you're saving each month, whether that's into traditional or high-yield savings accounts or a personal retirement account, such as a Roth IRA.

3. Label fixed and variable expenses

Once you've compiled a list of your monthly expenses, label whether they're fixed or variable. Fixed expenses are bills you can't avoid: rent, utilities, transportation, insurance, food and debt repayment. Variable expenses tend to be more flexible — your gym membership, for instance, or how much you spend on dining out.

If money was tight, you could always drop your gym membership and curtail your dining out spending, but you are likely always going to have to pay rent or your mortgage.

4. Determine average monthly cost for each expense

After you separate fixed and variable expenses, list how much you spend on each expense per month. You can look up your spending on bank and credit card statements.

Fixed expenses are easier to list on your budget than variable expenses since the cost is generally the same month-to-month. For example, debt repayment on a mortgage or auto loan will cost the same each month. But fixed utilities, such as electric and gas, and variable costs, such as dining and household goods, often fluctuate month-to-month, so you'll need to do some math to find the average.

For these categories and any where you spending changes from month-to-month, determine the average monthly cost by looking at three months worth of spending. To calculate the average amount you spend on groceries, for example, add up all of your grocery spending during the past three months and divide by three.

If you find that the average you spend on groceries each month is $433, you may want to round up and set the spending limit to $450.

5. Make adjustments

The last step in creating a budget is to compare your net income to your monthly expenses. If you notice that your expenses are higher than your income, you'll need to make some adjustments.

For instance, let's say your expenses cost $300 more than your monthly net pay. You should review your variable expenses to find ways to cut costs in the amount of $300. This may include reevaluating how much you spend on groceries, household goods, streaming subscriptions and other flexible costs.

It's a good idea to reduce these costs and regularly make adjustments to the amount of money you spend so you can avoid debt.

On the other hand, if you have more income leftover after listing your expenses, you can increase certain areas of your budget. Ideally, you'd use this extra money to increase your savings, especially if you don't have an emergency fund. But you could also use the money on non-essential things like dining out or traveling.

If you don't yet have a high-yield savings account consider opening one, such as Marcus by Goldman Sachs High Yield Online Savings, and earning 16 times more interest than traditional accounts.

Next steps

After you finish creating a budget, the next step is to stick to it. You can hold yourself accountable in a variety of ways. For starters, you can set reminders with your credit card and bank accounts when you reach a preset spending amount. You should also try tracking all of your expenses into your spreadsheet or budgeting app right after you make a purchase. And if you share expenses with someone else, make sure you're both on the same page with the budget and keep each other on track.

Information about the Marcus by Goldman Sachs High Yield Online Savings has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication. Goldman Sachs Bank USA is a Member FDIC.

It’s important to track and analyse your business’s financial performance to make sure your business is running efficiently. Knowing exactly where you spend and earn money could help you identify problems early, find time and cost savings, and improve how you run your business.

Read about the key outcomes you should be tracking to make sure your business is running smoothly.

On this page

Key performance indicators

A key performance indicator (KPI) is a performance measure that can be benchmarked internally against your progress over time or against your industry sector peers and will help you focus on achieving your business goals.

  • are achievable and quantifiable (i.e. able to be measured)
  • align to your business goals
  • focus your attention on areas that are most important to your business success.

Establishing effective KPIs

Effective KPIs can be:

  • output orientated—for example, the number of items sold or manufactured per week
  • input orientated— for example, the number of hours required to manufacture an item or the level of wastage (such as food discarded in a restaurant or cafe)
  • financial—for example, ratios that measure the proportion of costs relative to total sales.

The easiest KPIs to establish for your business are financial ratios that can be calculated from your business financial statements. Any KPI you develop should follow the ‘SMART’ acronym:

  • specific
  • measurable
  • achievable
  • relevant
  • timed.

Understanding financial ratios

A ratio is a means of comparing one number to another. Ratios containing 1 or more financial figures is called a ‘financial ratio’. You can use ratios to simplify financial data to monitor and improve your business performance.

  • assess how your business is performing
  • find areas of underperformance
  • identify potential for improvement
  • judge how a change in one area of your business may affect other areas
  • set goals for your business.

There are a range of ratios available to use but the most important, and most common, financial ratios are explained in our quick reference ratios infographic (JPG, 490KB).

Ratio calculators

Use our ratio calculators to help assess your business’s profitability, liquidity, operating efficiency and leverage.

Using ratios in your business

In financial analysis, ratios may be expressed as the ratio, rate or percentage, depending on your preference.

To provide useful meaning, financial ratios need to be compared with, for example:

  • the trend of your results over the past year or so (i.e. trend analysis)
  • the results by other competitors (if these are available) or general business standards
  • budgeted results
  • the effect of economic conditions.

Seek professional advice

Talk to your financial adviser for recommendations on the most suitable ratios for your business. They will also be able to show you how to produce reports to calculate and monitor them.

Ratios and benchmarking

When you start to analyse the figures from your financial ratios, you can use them to benchmark your business.

This will help you assess how your business is performing by comparing it to other businesses in your industry. You can use this information to improve the financial performance of your business.

Business and industry associations often collect financial data and make it available online.

Non-financial ratios

Non-financial ratios can also be important to highlight issues that may not show up on financial records. This could include problems with staff turnover, client dissatisfaction or inefficient use of resources such as material inputs.

In their book, Start Your Own Business, the staff of Entrepreneur Media, Inc. guides you through the critical steps to starting a business, then supports you in surviving the first three years as a business owner. In this edited excerpts, the authors discuss all the financial factors you should investigate when you’re considering buying an existing business.


So you’ve decided to purchase an existing business instead of starting from scratch and you’ve done some initial research to find out more about the business you’re thinking of buying. What now? If the business still looks promising after your preliminary analysis, your next step is to have your acquisition team (your accountant, attorney and banker) should start examining the business’s potential returns and its asking price. Whatever method you use to determine the fair market price of the business, your assessment of the business’s value should take into account such issues as the business’s financial health, earnings history, growth potential, and intangible assets (for example, brand name and market position).

To get an idea of the company’s anticipated returns and future financial needs, ask the business owner and/or accountant to show you projected financial statements for the business. Balance sheets, income statements, cash flow statements, footnotes and tax returns for the past three years are all key indicators of a business’s health. These documents will help you do some financial analyses that will spotlight any underlying problems and also provide a closer look at a wide range of less tangible information.

Among other issues, you should focus on the following:

Excessive or insufficient inventory.

If the business is based on a product rather than a service, take careful stock of its inventory. First-time business buyers are often seduced by inventory, but it can be a trap. Excessive inventory may be obsolete or may soon become so; it also costs money to store and insure. Excess inventory can also mean there are a lot of dissatisfied customers who are experiencing lags between their orders and final delivery or are returning items they aren’t happy with.

The lowest level of inventory the business can carry.

Determine this, then have the seller agree to reduce stock to that level by the date you take over the company. Also add a clause to the purchase agreement specifying that you’re buying only the inventory that’s current and saleable.

Accounts receivable.

Uncollected receivables stunt a business’s growth and could require unanticipated bank loans. Look carefully at indicators such as accounts receivable turnover, credit policies, cash collection schedules and the aging of receivables.

Net income.

Use a series of net income ratios to gain a better look at a business’s bottom line. For instance, the ratio of gross profit to net sales can be used to determine whether the company’s profit margin is in line with that of similar businesses. Likewise, the ratio of net income to net worth, when considered together with projected increases in interest costs, total purchase price and similar factors, can show whether you would earn a reasonable return. Finally, the ratio of net income to total assets is a strong indicator of whether the company is getting a favorable rate of return on assets. Your accountant can help you assess all these ratios. As they do so, be sure to determine whether the profit figures have been disclosed before or after taxes and the amount of returns the current owner is getting from the business. Also assess how much of the expenses would stay the same, increase, or decrease under your management.

Working capital.

Working capital is defined as current assets less current liabilities. Without sufficient working capital, a business can’t stay afloat—so one key computation is the ratio of net sales to net working capital. This measures how efficiently the working capital is being used to achieve business objectives.

Sales activity.

Sales figures may appear rosier than they really are. When studying the rate of growth in sales and earnings, read between the lines to tell if the growth rate is due to increased sales volume or higher prices. Also examine the overall marketplace. If the market seems to be mature, sales may be static—and that might be why the seller’s trying to unload the company.

Fixed assets.

If your analysis suggests the business has invested too much money in fixed assets, such as the plant property and equipment, make sure you know why. Unused equipment could indicate that demand is declining or that the business owner miscalculated manufacturing requirements.

Operating environment.

Take time to understand the business’s operating environment and corporate culture. If the business depends on overseas clients or suppliers, for example, examine the short- and long-term political environment of the countries involved. Look at the business in light of consumer or economic trends; for example, if you’re considering a store that sells products based on a fad like Crocs, will that client base still be intact five or 10 years later? Or if the company relies on just a few major clients, can you be sure they’ll stay with you after the deal is closed?

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34% (the majority) of respondents DIDN’T KNOW how long it would take until they were out of debt.

Debt is just as much of an emotional issue as a financial one. That’s why throwing a personal finance book at someone in debt or showing them a debt calculator produces little to no change.

If someone’s too afraid to even open the envelopes that will tell them how much they owe, “information” is not what they need. Instead, that person has to be willing to take action THEMSELVES before anything will change.

If you’re reading this now, and you’re ready to take action against your debt, I want to help you.

In fact, you can start getting out of debt TODAY through a 5-step system I’ve developed.

Just check out my popular article on how to get out of debt here.

Get out of debt and live a Rich Life

So that’s your debt to asset ratio. It’s a good way to keep an eye on your personal finances and an element to consider if you want to get a loan.

But eliminating debt is just the first step on the journey to living a Rich Life.

If you want to learn my best strategies for creating multiple income streams, starting a business, and increasing your income by thousands of dollars a year, download a free copy of my Ultimate Guide to Making Money below.

How to analyze your current finances

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How to analyze your current finances

We updated this page to include more specific information about how (and why) small businesses can manage their profit and loss.

We recently updated this piece to add more information about profit and loss statements, specifically how to create one by hand. We also clarified a few relevant terms, like depreciation and amortization, to make this piece more useful to you.

Profit and loss (P&L) management is the process of determining how to cut costs and increase revenue. You can start that process by looking at your business’s profit and loss statement (aka income statement). Since your income statement breaks down your business’s costs and gains, it offers key insights into growing your revenue and upping your business’s chance of success.

If you already understand profit and loss and simply want to generate a P&L statement, check out our article on how to prepare a P&L statement by hand. But if you want to know more about how exactly a business income statement can help you manage profit and loss, keep reading—we explore the meaning of profit and loss, how to read a profit and loss report, and why P&L management is so important to small businesses.

P&L management table of contents

How to analyze your current finances

What is profit and loss management?

Are you currently using your profit and loss statement to make informed decisions about your business’s finances? Then you’re already doing profit and loss management—nice work!

At its most basic, profit and loss management simply means using your P&L statement to make informed financial decisions about your business. Notably, profit and loss management doesn’t just mean you should measure how much you make—it also means looking at how much money you lose to expenses.

When you chart your profit and loss, you can identify gaps in your savings and expenses, defusing fiscal problems before they become major losses.

How to analyze your current finances

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What is a P&L statement?

A profit and loss statement breaks down your business’s profits and losses by category to show your net profit or net loss. That number also represents your income, which is why a P&L statement is also called an income statement. Creating an income statement is the crucial first step for managing profit and loss. It lays out your gains and losses clearly and should give you some clear starting points for where to trim costs.

Alongside the balance sheet and cash flow statement, your P&L statement is one of the three most important financial documents in your repertoire. Why? Because comparing the three statements gives you an accurate depiction of how your business stands financially at any given moment.

If you’re planning to take out a small-business loan and your lender requires you to submit a business plan (most do), you’ll need to include a profit and loss statement. From the very start of your business, you’ll need to make a profit and loss statement and continue to look at it frequently. It pays, literally, to get familiar with creating, reading, and interpreting income statements as soon as possible.

Wondering how often to create and check a key financial statement like an income statement? You should absolutely generate an annual P&L statement to chart your profits and losses over the last fiscal year, but generating monthly statements will give you better insights into how your business is performing month over month (or week over week—creating a P&L statement each week honestly isn’t a bad idea).

What information is on a P&L statement?

A profit and loss statement is divided into two main sections: a revenue section and an expenses section. You’ll subtract expenses from revenue to calculate your net profit, aka your bottom line. Typically, your P&L statement will show your profits and losses over a specific period of time, determined by you (for instance, over a year, a month, or a week.)

Depending on the accounting software or template you use, your P&L statement could have more or less detail than the categories we list. Still, all P&L statements should include the same information in roughly the same order. (If you want a more thorough breakdown of the categories we list below, check out our P&L statement how-to guide.)

Revenue (gross income)

Revenue—aka gross income—is the money you make by selling services or goods. When calculating revenue, make sure to list all sources of business income. That could include not just sales but also interest earned on investments.

Direct costs

Direct costs are expenses that stem directly from creating your product or delivering your services. Put a little differently, any expense connected to the company’s products or services is a direct cost. If you sell a product rather than a service, direct costs are usually referred to as the cost of goods sold, or COGS.

How to analyze your current finances

Gross monthly income: $8,000
Income taxes withheld monthly: $2,300
Monthly interest income from investments: $100
Monthly insurance payments: $700
Monthly housing expenses: $4,500
Monthly food expenses: $800
Miscellaneous expenses: $400

Gross monthly income: $8,000
Income taxes withheld monthly: $2,300
Monthly interest income from investments: $100
Monthly insurance payments: $700
Monthly housing expenses: $4,500
Monthly food expenses: $800
Miscellaneous expenses: $400

Savings account: $3,200
Checking account: $1,800
Credit card balance: $3,000
Car loan balance: $18,000
Car market value: $15,000
Furniture market value: $4,000
Stocks and bonds: $15,000

Savings account: $3,200
Checking account: $1,800
Credit card balance: $3,000
Car loan balance: $18,000
Car market value: $15,000
Furniture market value: $4,000
Stocks and bonds: $15,000

Gross monthly income: $8,000
Income taxes withheld monthly: $2,300
Monthly interest income from investments: $100
Monthly insurance payments: $700
Monthly housing expenses: $4,500
Monthly food expenses: $800
Miscellaneous expenses: $400

Savings account: $1,200
Checking account: $800
Credit card balance: $1,000
Car loan balance: $12,000
Car market value: $8,000
Furniture; market value: $2,000
Stocks and bonds: $10,000

Savings account: $1,200
Checking account: $800
Credit card balance: $1,000
Car loan balance: $12,000
Car market value: $8,000
Furniture; market value: $2,000
Stocks and bonds: $10,000

Savings account: $1,200
Checking account: $800
Credit card balance: $1,000
Car loan balance: $12,000
Car market value: $8,000
Furniture; market value: $2,000
Stocks and bonds: $10,000

Savings account: $3,200
Checking account: $1,800
Credit card balance: $3,000
Car loan balance: $18,000
Car market value: $15,000
Furniture market value: $4,000
Stocks and bonds: $15,000

How to analyze your current finances

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

Tracking your spending on a regular basis can give you an accurate picture of where your money is going and where you’d like it to go instead.

Here’s how to get started tracking your monthly expenses.

1. Check your account statements

Pinpoint your money habits by taking inventory of all of your accounts, including your checking account and all credit cards you have. Looking at your accounts will help you identify where you’re spending.

Annamaria Lusardi, the Denit Trust chair of economics and accountancy at the George Washington University School of Business, recommends getting a sense for your monthly cash flow — what’s coming in and what’s going out.

2. Categorize your expenses

Start grouping your expenses. Some credit cards automatically tag your purchases in categories like department store or automotive. You could find that those impulse buys at Target are costing you a lot. Or maybe you’ll realize you’re paying for recurring subscription services that you could do without.

Your spending will consist of both fixed expenses and variable expenses. Fixed expenses are less likely to change from month to month. They include mortgage or rent, utilities, insurance and debt payments. You'll have more room to adjust variable expenses like food, clothing and travel.

How to analyze your current finances

3. Use a budgeting or expense-tracking app

Budgeting apps like You Need a Budget and Mint are designed for on-the-go money management, letting you allocate a certain amount of spendable income each month depending on what you’re taking in and what you’re paying out. These types of apps will work if you’re willing to log your purchases, put in the time and stick to your budget. (Following these budgeting tips will help you do just that.)

Depending on what you get out of it, a paid app may be worth the cost. You Need a Budget , for instance, is $84 a year or $11.99 a month (after a 34-day free trial), but it has appealing benefits, like its ability to sync transactions directly from your bank account and its option for live workshops with the company’s support team.

NerdWallet has also identified the best expense tracking apps based on ratings and popularity among users.

4. Explore other expense trackers

Not a fan of apps? A spreadsheet is another valuable money-tracking tool. You can find a variety of free budget templates online, and NerdWallet also offers an online budget worksheet .

Or, if you have a more complex financial portfolio, you can buy software. Richard H. Serlin, a lecturer at the University of Arizona, recommends Quicken Premier, which lets you import your bank transactions and monitor your investments.

“This is just a much smarter, more effective, clear and organized way of keeping track of your spending, and pretty much all aspects of budgeting and financial investing, than trying to do it yourself with an Excel table or paper ledger,” he says. Quicken Premier regularly costs $77.99 a year, but Quicken also offers a basic Starter edition for $35.99 a year.

5. Identify room for change

As you track, be ready to make adjustments. It’s worth your time to keep tabs on your monthly expenses because of what you’ll uncover. “Tracking expenses can be very valuable for finding out what's really costing you, and what is not as bad as you thought,” Serlin says.

He also notes that lowering the “big fixed expenses” in your life, like the cost of housing, vehicles and utilities, can make a significant impact on your budget. If you need help adjusting your major recurring monthly expenses like your mortgage or car loan, check out NerdWallet’s tips for how to build a budget .

What’s next?

Track your expenses for free with NerdWallet .

About the author: Courtney Neidel is NerdWallet’s consumer savings expert. Her work has been featured by USA Today and The New York Times. Read more

Discretionary Expenses: The Extras, Not Essentials

Budgeting 101: How to Budget Money

Average Monthly Expenses: From Single Person to Family of 5

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For many new businesses, a budget is part of the financial plan created during the initial planning stage for the business and is included in the business plan.

But what if you’re considering a spinoff of your current business, exploring the idea of launching a new venture, or are in the process of revamping your finances? In any of these cases, you may not be ready or have a need for a complete business plan but a budget is in order.

A business budget is much like any kind of budget you would use for your personal finances. In business, it can be an effective tool to help you determine whether or not your business idea is viable. It also gives you an opportunity to evaluate your current financial situation and tailor your plan in a way that will help you reach the financial goals of your business. Plus, maintaining a budget for your business on a regular basis can help you track expenses, analyze your income, and anticipate future financial needs.

Step 1: Identify Your Goals

The first step of creating a budget is identifying your goals for your business. Much like the information you would include in a business plan, you will need to think through what you want to accomplish with your business, i.e. how much you want to make.

Step 2: Review What You Have

Take time to review documents from your business as it is today, including your income statement, your balance sheet, outstanding debts, past tax returns, assets, liabilities and a projection of immediate cash flow. And don’t forget to pull out any current budgets you use for your business, as they can serve as a starting point for your new budget.

Step 3: Define the Costs

What are the specific costs associated with each of your goals identified in Step 1? This is where you would break down each goal into an annual tangible amount of money, and then break it down by month. Use past data from your business to fill in all of the costs, and do some research to generate approximations for each item you do not know the cost for.

Step 4: Create the Budget

Taking the information you have from Step 2 and Step 3, develop a spreadsheet. One way to do this is by working backwards from the bottom line and seeing where you end up. Keep in mind that you may need to make some adjustments as you develop your budget.

Your budget should be a tool you use daily in your business, not a document you create and then forget. By using a working budget, you will become more accurate over time and be able to make good decisions about your business and any new ventures you’re considering.

Here are some sample budgets to get you started:

Do you have a budget for your business? How often do you update it?

*I’m not a financial planner or a business advisor. This post is just meant to give you some ideas for creating a business budget. Consult a professional for more information.

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Alyssa Gregory is a digital and content marketer, small business consultant, and the founder of the Small Business Bonfire — a social, educational and collaborative community for entrepreneurs.

How to analyze your current finances

A financial analysis is a paper that contains the details of the company’s financial health. Even though the firm’s history, financial statements and stock performance can summarize various aspects of its financial performance, the financial analysis paper incorporates all the info into a comprehensive form. A financial analysis paper helps lenders, investors and financial analysts to determine if a business can deliver a solid return on investment.

alt=”How to write a financial analysis paper” width=”1024″ height=”67″ />

Composing a company’s comprehensive financial analysis helps investors to determine whether to invest in the business. while there is no specific approach to write the document and its presentation styles tend to vary, the key components must be incorporated on any financial analysis. Once all the component of a financial analysis has been carefully reviewed, a conclusion can be made regarding the financial health of a particular business.

An executive summary section comprises the most significant results from the financial analysis in a concise and easy-to-read format. This section encapsulates the data presented in the rest of the report, comprising the implications those statistics have in the industry in a general and the company at large. The summary section can comprise brief summaries of the firm’s mission, history, current performance, and expected outlook. Additionally, the section will include a summary if the firm’s industry, market situation and competition.

alt=”Financial statement” width=”1024″ height=”67″ />

Bear in mind that the core of a good financial analysis paper is the collection of the firm’s financial statements. The statements include the balance sheet, equity statement, income statement and cash flow statement. The balance sheet will display the firm’s allocation of assets, liabilities and shareholder’ equity. On the other hand, the income statement will display the firm’s income, expenditure, losses and profits. The equity statement is used to show the changes in the amount of shareholder’s equity while the cash flow will stipulate where the firm obtained its cash and how it was spent.

alt=”Industry analysis” width=”1024″ height=”67″ />

It is evident that no business exists in a vacuum and for this reason, a financial analysis should have an examination of the firm’s industry. The report will consist of a clear comparison between the firm’s financial health and that of its competitors. Additionally, it will report the firm’s market share and prominence in the industry. All these factors assist the investors to determine if the form is competing well in its industry and could make a lucrative investment.

alt=”Financial ratios” width=”1024″ height=”67″ />

Financial ratios help in revealing various significant aspects such as the company’s liquidity, debt load and efficiency. The current liquidity ratio is referred to as the ratio of the firm’s current assists to its current liabilities. On the other hand, the debt ratio is the ratio of the firm’s total debt to its total equity, while the return ratio weighs a company’s profits against its shareholder’s equity. The price to income ratio can be computed by dividing the present market price per share by the after tax income per share.

alt=”The basics of a professional financial analysis paper” width=”1024″ height=”67″ />

The procedure of writing a professional financial analysis paper can be instrumental in ensuring that an investor gets all the information needed when researching a business. below is an outline of the primary sections to ponder when composing a financial analysis paper for a certain company.

alt=”The business overview” width=”1024″ height=”67″ />

A good financial paper must begin with a description of the business so that it can assist investors understand the company, its industry, its motivation and any advantage it has over its competitors. Note that these aspects play a vital role in assisting to explain if a business can be lucrative venture or not. A company’s annual report with securities and exchange commission tend to offer a perfect starting points.

alt=”Investment thesis” width=”1024″ height=”67″ />

The incentive for bullish or bearish stance on a firm is uncovered in this part. It can come at the top of a report include parts of a firm overview, but regardless of its position in an analysis must cover the primary investment negatives and positives. A fundamental analysis that contains the financial statements like sales and profit growth trends, cash flow generation strength, debt level and company’s liquidity can be included in the investment thesis. Note that no information is too insignificant in this section since it can as well cover efficiency ratios like the core components in the cash conversion cycle, turnover ratios and detailed breakdown of return on equity components.

The most vital component of analyzing previous growth trends is to synthesize it into a forecast of the business’s performance. A good financial analysis paper will help analyst to accurately extrapolate the past trends into the future. Additionally, it helps them decide which aspects are more significant in defining success for a business.

alt=”Valuation” width=”1024″ height=”67″ />

The most significant section of any financial analysis is to arrive to an independent value for the stock and compare this to the current market price. However, there are three key valuation techniques you need to ponder. The first one is the discount cash flow analysis that helps in estimating the business’s future cash flow and discount them back to the future at a projected discount rate. The second one is the relative value where the fundamental metrics and valuation ratios such as price to sales ratio, price to income ratio and P/E to business growth ratio are compared competitors. Another key contrast is to consider is what other competitors have been out for or the price paid for a purchase. The last technique is looking at the book value and try to estimate what the business may be worth if it collapses or liquidated.

alt=”Key risks and other considerations” width=”1024″ height=”67″ />

The part can be either the bull or bear story in the investment thesis, but it helps to detail the key aspects that might disrupt either an optimistic or bearish stance. The above mentions sections can prove sufficient, but based on the things that are covered during a financial analysis, other new parts may be included in the paper. Parts that are meant to cover corporate governance, political environment or near-term news flow can be worthy of a comprehensive financial analysis paper. Bear in mind that anything significant that can affect the future value of a stock must be included in the paper.