Ratio Analysis

By |2021-07-28T02:28:08-05:00March 22nd, 2018|Comments Off on Ratio Analysis

Introduction

This topic will cover the use of the Ratio Analysis form in Total Office Manager.

Usage

Financial ratios are calculated using common financial numbers found in your company’s financial reports. Use this form to analyze your company’s financial performance, solvency, and efficiency.

Important Warning

These ratios are only as good as the information is in Total Office Manager. If your company has bookkeeping errors or you do not exercise proper accrual accounting techniques, this information will be WRONG.

Total Office Manager’s ratio analyses are NOT a substitute for professional qualified analysis of your company. If you are unsure of what these values mean or you have reason to think they are not accurate, seek immediate advice from a qualified professional.

Form Access

From the main menu, click Reports | Financials | Financial Ratios.

Field Definitions

As Of The ending date used to calculate the ratio. We do not include a date range as this is not possible. This is due to the fact that many of the accounts we use are a running total – they start at the beginning of time.
Refresh Refreshed information on this form. Used when you believe changes have been made in Total Office Manager that could change these values.
Info This button provides additional information including the base numbers used to calculate the ratios.
Ratio Description (left side of the grid) This is the name of the actual ratio. Please keep in mind that there is no firm standardization when it comes to ratio names. The ration you are looking for might be there but under a different name. Study the formula and not necessarily the name.
Ratio Value (right side of the grid) This is the actual value of the ratio.
Bottom Portion Of Form The bottom portion of the form contains a brief explanation of the ratio, the actual formula used, and the actual math involved.

Step-By-Step

  1.  Open the form as instructed above.

  2. Select an As of Date (like the end of the year).

  3. Carefully study the values. Set different dates and compare them with prior periods.

  4. Print a report of these ratios – if you wish to.

Tips

  • Open your chart of accounts list and please be sure that your inventory account (chart of accounts) has the “This Account is Used for Inventory Purposes Only” checkbox checked. This tells Total Office Manager that the account should be used for inventory-related ratios.
  • When you labor-related Cost of Goods Sold accounts and Labor Related Expense accounts, you should also check to make sure the “Used for Payroll and Labor Only checkbox is checked. This tells Total Office Manager that the account should be used for labor-related ratios.
  • The ratios use various account types. The As of Date considers the account type. Balance Sheet type of accounts use a “running total” up to the As of Date. Income Statement type of accounts use a date range up to the As of Date. Total Office Manager considers your company’s definition of a “Year” in the Company Info form. This is where you tell Total Office Manager if you use a regular calendar year of a special year.

Related Topics

Financial Ratios. There Meaning and Usage by James R. Leichter

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