When you’re running a business, it’s easy to get caught up in the day-to-day tasks—chasing invoices, managing staff, and serving customers. But stepping back to assess the overall health of your business is just as important.
Regularly reviewing your financial position helps you:
Spot early warning signs of potential issues
Make informed decisions about growth and investment
Plan more effectively for long-term success
At Bidwell Accountancy Ltd, based in Milton Keynes, we support small businesses, sole traders, and limited companies with clear financial insights. One of the best ways to measure performance is by using key financial ratios.
Here are some quick checks you can use to understand how your business is really doing
Liquidity Ratios – Can You Pay the Bills?
Liquidity ratios show how easily you can convert assets into cash to meet short-term obligations.
Current Ratio
📊 Formula: Total current assets ÷ Total current liabilities
A 2:1 ratio is often considered healthy, but it depends on your industry.
Quick Ratio
📊 Formula: (Current assets – stock on hand) ÷ Current liabilities
This excludes stock (which may not sell quickly), giving a clearer picture of your ability to meet urgent bills.
🔹 Solvency Ratios – Long-Term Stability
Solvency ratios measure whether your business can manage long-term debts, not just immediate cash flow.
Leverage Ratio
📊 Formula: Total liabilities ÷ Equity
A higher ratio indicates reliance on debt, which can make borrowing harder.
Debt-to-Assets Ratio
📊 Formula: Total liabilities ÷ Total assets
This shows what percentage of your assets are funded by debt.
🔹 Profitability Ratios – Are You Making Enough?
Profitability ratios measure how efficiently your business is turning sales into profit.
Gross Margin Ratio
📊 Formula: Gross profit ÷ Total sales
Helps you check whether sales are covering your operating costs.
Net Margin Ratio
📊 Formula: Net profit ÷ Total sales
Shows the percentage of each pound of sales that remains after expenses (excluding tax).
✅ Why Business Health Checks Matter
Carrying out these ratio checks regularly gives you a clear picture of where you stand today—and what to focus on tomorrow. It’s about spotting trends, planning ahead, and ensuring your business stays financially strong.
At Bidwell Accountancy Ltd, we help SMEs across Milton Keynes and beyond to:
Understand financial performance
Improve cash flow and profitability
Plan strategically for growth
👩💼 Ready to Review Your Business Health?
Don’t leave the future of your business to guesswork. Let us help you calculate and interpret these key ratios so you can make informed, confident decisions.
📞 Call us on 01908 380391
🌐 Email us at info@bidwellaccountancy.com
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