I would like to measure the success of a company, what are 3 types of Ratio, and how to calculate them?

Thanks for invitation

Ratios analysis helps us to put out numbers into context. These ratios used together can help give a clear picture of the success of a company.

Three of the ratios are:

    *  Return on assets this a primary ration and most important ratio. It is the ratio of net income to total assets. The ratio measures overall effectiveness in creating profits with the company's assets. The higher the ratio the better.

    formula return on assets = net income/ total assets.

   *   Net profit margin- is the percentage of each sales dollar that remains after all expenses have been deducted. A higher ratio is better but what is considered a good profit margin varies greatly across industries.

                 formula.

                       net profit- earnings/sales

     *    Profit margin is the amount of profit left over from each dollar of sales after expenses are paid. again the higher the number the better as it indicates that the firm retains more of each sales dollar the company makes.

        formula

                  profit margin = profit/sales

However, it is important to know that a ratio on its own has no meaning. The essence of ratio analysis is comparison and to look at the trend of that ratio over time.

-nsabh Revenue to capital

- The percentage of debtors to capital

- Ratio of current assets to creditors

profitability and capital structure ratios is the best choice 

Financial soundness of the institution through the following relationship:

Sound institution is if: Working capital> 0 => Current Assets> short-term debt.

Assets

Any liquidity ratio is greater than one> 1

Short-term debt

The existence of capital positive from the standpoint of the traditional factor analysis, mean that the institution is able to cope with benefits and a guarantor for the balance of the financial Hiklleha even in the case of exposure to risks.

3-2 ratios used in the analysis of the liquidity perspective:

Assets

Current ratio =

Short-term debt

Current ratio of approximate indicators of the study and analysis of liquidity and payment are considered because they clearly show the extent of coverage of obligations owed by liquid assets that can be converted into cash on dates consistent with the maturity of these commitments dates (1), and therefore The decline in this ratio high standard of comparison indicates that the institution You will experience difficulties in the face of the obligations owed by the due dates.

Traded - inventory assets

- Current ratio = fast

Short-term debt

The reason is to restore the inventory of current assets components being the least of fluidity and speed to convert to cash, because of the long time needed by the sales process, and this percentage refers to the organization's ability to repay current liabilities in full without resorting to the sale of any commodity stocks.

Cash assets

- Cash ratio =

Short-term debt

This ratio is also called the monetary standard, which measures the organization's ability to repay short-term obligations using cash) available in the treasury), without bearing the burden of sacrifice part of other current assets without rational justification.

Finally, we note that rely on working capital as an indicator to measure the financial soundness of the institution is not enough because it does not actually reflect the organization's ability to continue, and this is due to its use alone, without the use of other indicators.

The second requirement: Financial Analysis of the functional perspective L'analyse fonctionnelle

This analysis appeared since the seventies and later adopted by the French scheme accounting for the year 1982, especially in the French bank's business (2) and tries this perspective exceeded dhimmi approach that relies on the principle of Alciolh- maturity, enter the functional concept of the institution, and considering the latter unit consists of several functions, which are the various operations carried out by order of the institution.

There could be several options to measure success of a company with different scenario. But, I would recommend the following three ratios.

 1.    Current ratio: (current assets)/(current liabilities)

2.    ROI (Return on investment)=(net profit after tax)/(total assets)

3.    Debt/equity ratio: Total debt/Shareholder’s equity

1. ProfitabilityThis is probably the most obvious item on the list. Checking in to make sure your business remains profitable is key. In their post on small business success management, SurePayrollrecommends keeping up on your bottom line. If you find that you’re continually in the red, it’s time to reevaluate your finances. This is where you might consider enlisting the help of a financial specialist to help you get back on a profitable path.2. Your SatisfactionAre you satisfied with the direction your business is headed in? Whether you’re completely and totally satisfied, or looking back with a little regret, take a moment to come up with a list of things you hope to improve this year. Chances are, you’ll come up with at least one with the potential to increase your business’s future success.3. Employee SatisfactionEmployees are everything. Keeping your employees happy reduces risk of liability and encourages better customer service within your business. Evaluate wage averages in your industry. How do yours stack up? What’s the workplace culture like? Is there anything you can do to increase your employees’ connection to their place of work? Enlisting the help of an affordable small business security system may also help here as it can show you exactly what goes on behind the scenes.4. Competitive StanceComparing yourself to others has always been a big “no no” in your personal life. However, a little comparison goes a long way in setting effective goals for your business. Understanding how your product/service stacks up against its competitors is key to staying on top of trends and keeping your customers satisfied with what you have to offer.5. What Your Customers are SayingIt’s impossible to keep track of all customer mentions of your business, however, online forums (love them or hate them) have made it easier to catch more of the discussion surrounding your brand. Checking in on your online reputation is crucial to measuring the success of your business. Review comments and ratings left for your products and/or services to resolve any issues that could be hindering your online image and determine areas where you can improve.6. Efforts to InnovateWhat have you done to improve your products and/or services? How’s your customer service looking? Are you thinking outside of the box in your marketing efforts? These are just some of the areas where you should be constantly innovating to stay on top. The Muse gives lists of the questions you should be asking yourself to properly evaluate your success from every perspective.7. Leads AcquiredGenerating qualified leads on a consistent basis is huge! Take a moment to look at the leads you’ve acquired. Are they up? Are they down? What can you do to increase them?8. Client RetentionLoyal customers are a business’s best friend. They rake in referrals and continuously contribute to profits. This is why it’s important to take note of your retention rate when measuring your success. If your products and/or services are meant for one-time use, you might consider taking referral numbers into account here instead.9. Customer ConversionIf your lead to conversion ratio is off, you’re missing out on a lot of business. Understanding your conversion rate is key to understanding how successful your business is in appealing to its target market. Your website, customer service, storefront appearance, and reputation are all areas to consider if you find that your conversion rate is lower than average. John Janstch’s article on Entrepreneur provides some great details on this.10. Social Media SuccessMany small business owners operate under the misconception that social media marketing is irrelevant to their business. This couldn’t be further from the truth. Strategically selecting social platforms to focus your efforts on, then effectively managing them is a great way to connect with your customers on a more personal level.

Return on capital employed

Net Profit Margin

Debt Equity Ratio

there are three type of ratio 

1:New ratio:if incoming patner brought cash for goodwill paid to old patner: oldpatner-remender

2:sacrificy ratio if incoming partner brought cash for goodwilland paid to partner:old patner-new ratio

3:old ratio:if incoming patner brought for goodwill just raised in the books and their written off

Financial ratios express relationships between financial statement items. Although they provide historical data, management can use ratios to identify internal strengths and weaknesses, and estimate future financial performance. Investors can use ratios to compare companies in the same industry. Ratios are not generally meaningful as standalone numbers, but they are meaningful when compared to historical data and industry averages.

TO MEASURE SUCCESS OF COMPANY , YOU CAN DO IT THROUGH INCOME STATEMENT )NET PROFIT) OR FINANCIAL STATEMENT - INCREASING IN ASSETS , AND CASH FOLLOW STATEMENT  - CASH AND BANK

Financial ratios express relationships between financial statement items. Although they provide historical data, management can use ratios to identify internal strengths and weaknesses, and estimate future financial performance. Investors can use ratios to compare companies in the same industry. Ratios are not generally meaningful as standalone numbers, but they are meaningful when compared to historical data and industry averages.

The most common liquidity ratio is the current ratio, which is the ratio of current assets to current liabilities. This ratio indicates a company's ability to pay its short-term bills. A ratio of greater than one is usually a minimum because anything less than one means the company has more liabilities than assets. A high ratio indicates more of a safety cushion, which increases flexibility because some of the inventory items and receivable balances may not be easily convertible to cash. Companies can improve the current ratio by paying down debt, converting short-term debt into long-term debt, collecting its receivables faster and buying inventory only when necessary.

Solvency ratios indicate financial stability because they measure a company's debt relative to its assets and equity. A company with too much debt may not have the flexibility to manage its cash flow if interest rates rise or if business conditions deteriorate. The common solvency ratios are debt-to-asset and debt-to-equity. The debt-to-asset ratio is the ratio of total debt to total assets. The debt-to-equity ratio is the ratio of total debt to shareholders' equity, which is the difference between total assets and total liabilities.

Profitability ratios indicate management's ability to convert sales into profits and cash flow. The common ratios are gross margin, operating margin and net income margin.

A)   The gross margin is the ratio of gross profits to sales.

B)   The gross profit is equal to sales minus cost of goods sold.

C)   The operating margin is the ratio of operating profits to sales and net income margin is the ratio of net income to sales.

The operating profit is equal to the gross profit minus operating expenses, while the net income is equal to the operating profit minus interest and taxes. The return-on-asset ratio, which is the ratio of net income to total assets, measures a company's effectiveness in deploying its assets to generate profits. The return-on-investment ratio, which is the ratio of net income to shareholders' equity, indicates a company's ability to generate a return for its owners.

Two common efficiency ratios are inventory turnover and receivables turnover. Inventory turnover is the ratio of cost of goods sold to inventory. A high inventory turnover ratio means that the company is successful in converting its inventory into sales. The receivables turnover ratio is the ratio of credit sales to accounts receivable, which tracks outstanding credit sales. A high accounts receivable turnover means that the company is successful in collecting its outstanding credit balances.