Joey de Wit on LinkedIn: Financial Ratios are key to analysing a business. And even better, they… (2024)

Joey de Wit

Owner at DEWITCO Group | Fractional CFO

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Financial Ratios are key to analysing a business.And even better, they can help you:• Make better financial decisions• Compare results to competitors• Spot important trends over timeThis sheet covers what you need to know- hope it helps:

  • Joey de Wit on LinkedIn: Financial Ratios are key to analysing a business.And even better, they… (2)

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Osama Hammoudeh

Managing Director I Regional Director Strategic Accounts I Government Markets I Digital Transformation I Customer First

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Osama Hammoudeh

Managing Director I Regional Director Strategic Accounts I Government Markets I Digital Transformation I Customer First

5mo

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    What I think is one of the hardest things of growing a biz: time management. Not just the obvious stuff like being productive or procrastinating work. But the actual stuff that you need to keep track off as you scale up: > Utilisation; > Cost per Hour; > Billable Rate. Like I often find my days just fly by and then at 21:00 I'm wondering what I really did. Now if you'd add a couple team members to that and even more clients that becomes way more difficult to answer. Next phase for me is to really get more intentional about where I put my time. Familiar feeling?

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  • Joey de Wit

    Owner at DEWITCO Group | Fractional CFO

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    If you had a crystal ball. Telling you how to proceed with your agency. You'd hit your goals faster, right? Although you can't quite predict the future, you can forecast it. I'm giving access to a step-by-step guide on how to create a financial forecast for your agency. This will help you ensure profitability as you scale and take on more clients, hire accordingly etc. All you have to do is comment "access", and I'll get it across to you.

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  • Joey de Wit

    Owner at DEWITCO Group | Fractional CFO

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    Most entrepreneurs dream of their big pay day, i.e - exiting their business. It would be a shame if you worked your ass off for 5 years to build your agency; only to sell it for low multiples in the end, just because your finances weren't in check. So, if selling your agency is the ultimate goal, if it's in the horizon for this year, or if it's just something you're curious about - I got you. I created a guide going over all the things you need to have in place in your agency to be able to sell it for the highest possible multiples. All you have to do is comment "access", and I'll get it across to you.

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  • Joey de Wit

    Owner at DEWITCO Group | Fractional CFO

    Stocks, shares, crypto - forget all of that. Reinvest back into your own business. And if you're an agency owner looking to do so, I have a resource going over the 10 Areas of your business to re-invest cash flow into for max growth. If you're looking to scale this year, having these things in mind is a must-have. All you have to do is comment "access", and I'll get it across to you.

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  • Joey de Wit

    Owner at DEWITCO Group | Fractional CFO

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    +$50,000... +$30,000... +$3500... these were the savings we found for one of the agencies we work with. I wrote down the entire breakdown of the process we followed, including: - How to correctly set up your bank and Stripe accounts for international payments; - How to implement a budgeting system to spot inefficiencies; - How to ensure your bookkeeping is bullet-proof. If you're looking to scale this year, having this infrastructure in place is a must-have. And not having it in place means you're literally burning cash. All you have to do is comment "access", and I'll get it across to you.

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  • Joey de Wit

    Owner at DEWITCO Group | Fractional CFO

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    If this is your agency– pay attention... I've met agency owners doing multi 5 and even 6 figures a month, running on razor thin profit margins. One of the main reasons why people start agencies is because of the margins. So why even run such a high-maintenance business if your margins are tiny? The space might seem easy when you see the gurus online boasting about similar figures - but plenty are fake gurus. It's no secret that these guys make money from selling courses, but many of them ONLY make money from the courses. Your profit margin will go down as you grow, but if you're struggling to keep your margins over 25% - you're doing something wrong. If you want to make sure your finances are in check going into 2024, I have a resource for agencies doing +$50k/mo. Comment "access", and I'll send you the setup you need to ensure your agency is primed for growth from a financial standpoint.

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  • Joey de Wit

    Owner at DEWITCO Group | Fractional CFO

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    Operating a business is not the same as managing one. And I'm telling you from experience from having seen it from both sides for the last few years. I now work with multiple marketing agencies, and analysed dozens of businesses while I was in banking (managing). And at the same time, I run my own financial consulting business. If I was back in corporate and only had to worry about my to-do list - I'd sleep extremely well at night. But knowing that the businesses I work with NEED my services to run smoothly, and that if I don't do any work for my business, it literally all comes to a stop: definitely keeps me on my toes. Bottom line is, running a business isn't for everyone. I'm not saying you should or shouldn't start your own. But definitely ask yourself: "Can I handle the heat?" before you start one.

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  • Joey de Wit

    Owner at DEWITCO Group | Fractional CFO

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    The agency space has many skilled entrepreneurs, marketers and operators. But many of them lack a specific skillset. Maybe because their agency is their first venture, and sometimes even their first professional experience. Or maybe because they have no formal education in business management or finance (totally fine btw). So the unfortunate truth is: many of them can't properly deal with their finances. You'll never be good at everything - which is okay. But not spending enough time on this part of the business means you won't be able to grow as fast as you'd like. If you'd like to focus on what you're good at and grow your business at a high pace, without worrying about your finances crumbling: comment "finance" and I'll get in touch with you shortly.

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  • Joey de Wit

    Owner at DEWITCO Group | Fractional CFO

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    It took me 10+ years of failed side-hustles to find my passion. - Failed a mobile app; - Failed a web design business; - Failed and quit multiple online sites; But now I'm finally seeing success with my fractional CFO services. Still, social media - and LinkedIn is no exception - makes us think everybody is a multimillionaire by 21, and that if you're not retired, living in Bali by 25: you're a total failure. This obviously couldn't be further from the truth. Everyone has a different timeline. Just keep trying and following your interest until you find what sticks. Not easy, but worth it.

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Joey de Wit on LinkedIn: Financial Ratios are key to analysing a business.

And even better, they… (2024)

FAQs

What are the ratios used in financial analysis? ›

These are the most commonly used ratios in fundamental analysis. They include dividend yield, P/E ratio, earnings per share (EPS), and dividend payout ratio. Investors use these metrics to predict earnings and future performance.

Why are financial ratios important? ›

Financial ratios offer entrepreneurs a way to evaluate their company's performance and compare it other similar businesses in their industry. Ratios measure the relationship between two or more components of financial statements. They are used most effectively when results over several periods are compared.

What's the basic purpose of examining trends in a company's financial ratios and other data? ›

1) The main purpose of examining trends in a company's financial ratios and other data is to be able to spot anomalies and predict the future. Being able to spot anomalies and predict the future gives companies the ability to make changes to improve operations, especially when the trend is unfavorable.

What are the four types of ratio analysis? ›

In general, there are four categories of ratio analysis: profitability, liquidity, solvency, and valuation. Common ratios include the price-to-earnings (P/E) ratio, net profit margin, and debt-to-equity (D/E).

What are the main financial ratios analysis? ›

Ratios include the working capital ratio, the quick ratio, earnings per share (EPS), price-earnings (P/E), debt-to-equity, and return on equity (ROE). Most ratios are best used in combination with others rather than singly to accomplish a comprehensive picture of a company's financial health.

What are the benefits of ratio analysis? ›

Advantages of Ratio Analysis
  • Helps simplify complex figures and establish relationships. ...
  • Helps in comparative analysis. ...
  • Indicates efficiency. ...
  • Determines solvency. ...
  • Determines liquidity. ...
  • Indicates performance in the market. ...
  • Reviews profit. ...
  • Aids strategic planning.

What does each financial ratio tell us? ›

Keeping track of financial ratios is an essential way for you to examine your company's financial health. Ratios reveal basic information about your company, such as whether you have accumulated too much debt, stockpiled too much inventory or are not collecting receivables quickly enough.

Why are ratios important in real life? ›

Using ratios and proportions in everyday life includes calculating money in foreign currency while travelling abroad, determining how much of an ingredient is required to be used while following a recipe, budgeting out your monthly expenses, etc.

What are the three most important financial ratios? ›

5 Essential Financial Ratios for Every Business. The common financial ratios every business should track are 1) liquidity ratios 2) leverage ratios 3)efficiency ratio 4) profitability ratios and 5) market value ratios.

What is the conclusion of ratio analysis? ›

Ratio analysis helps interpret the financial data of a company to understand its true standing. Using ratio analysis, one can determine a company's liquidity, profitability and overall performance. It is also an important tool for investors to understand the worth of a company when investing.

What are the limitations of ratio analysis? ›

ratio analysis information is historic – it is not current. ratio analysis does not take into account external factors such as a worldwide recession. ratio analysis does not measure the human element of a firm.

How to tell if a company is doing well financially? ›

12 ways to tell if a company is doing well financially
  1. Growing revenue. Revenue is the amount of money a company receives in exchange for its goods and services. ...
  2. Expenses stay flat. ...
  3. Cash balance. ...
  4. Debt ratio. ...
  5. Profitability ratio. ...
  6. Activity ratio. ...
  7. New clients and repeat customers. ...
  8. Profit margins are high.

What is the ideal financial ratio? ›

The ideal ratio is 0.67. If the ratio is less than 1, one can use it to purchase fixed assets.

What are the 5 profitability ratios? ›

Remember, there are only 5 main ratios that you must be measuring:
  • Gross profit margin.
  • Operating profit margin.
  • Net profit margin.
  • Return on assets.
  • Return on equity.
Nov 9, 2021

What are the 5 major categories of ratios? ›

The following five (5) major financial ratio categories are included in this list.
  • Liquidity Ratios.
  • Activity Ratios.
  • Debt Ratios.
  • Profitability Ratios.
  • Market Ratios.

What are the 4 most commonly used categories of financial ratios? ›

Assess the performance of your business by focusing on 4 types of financial ratios:
  • profitability ratios.
  • liquidity ratios.
  • operating efficiency ratios.
  • leverage ratios.
Dec 20, 2021

What are the 5 methods of financial statement analysis? ›

What are the five methods of financial statement analysis? There are five commonplace approaches to financial statement analysis: horizontal analysis, vertical analysis, ratio analysis, trend analysis and cost-volume profit analysis. Each technique allows the building of a more detailed and nuanced financial profile.

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