15 SUGGESTED RATIOS TO REGULARLY MONITOR

Recognizing that an almost infinite number of possible financial and operating performance ratios can be calculated, a key challenge for making comparative ratio analysis meaningful is to identify: 1) which ratios are the most useful to monitor, and 2) with what frequency?

The table below identifies fifteen suggested ratios for monitoring performance on a daily, monthly, quarterly, and/or annual basis. These are provided as a possible framework for you to adopt or to serve as a guide for developing a similar set of measures that are best for your situation. As shown in the table, the key dimensions of management that should be monitored on a regular basis are:

• Sales Performance

• Profit Margins

• Personnel Productivity

• Assets, Especially Inventory and Receivables

• Financial Management

• Liquidity (i.e., cash)