From the course: The 45-Minute Business Plan
Business ratio analysis
- A ratio is calculated by dividing total liabilities by total assets. Ratio analysis is a tool that was developed to perform quantitative analysis on numbers found on financial statements. Ratios also help link the three financial statements together and offer figures that are comparable between companies across industries and sectors. Ratios analysis is one of the most widely used fundamental analysis techniques. Since this is the last opening section in the report, you'll want to write a brief paragraph or two that explains how you came up with the ratios. Here's an example of one we've used in the past. The business ratios table is a comparison of industry standard ratios for comparable sized businesses in the same industry as ABC LLC versus the projected financial ratios found in the business plan. The ratios table calculates the key business ratios for ABC LLC using the year end projected totals for each year projected. Corresponding industry profile ratios are calculated using the combined statistical data of comparable sized US businesses in the same North American Industry Classification System. Now create or export that data from your pro forma and include it in a table like this. These are the segments you need to create an effective business plan for your startup.
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