Combined ratios

No one would use a single ratio to decide whether one vehicle was a better or worse buy than another. MPG, MPH, annual depreciation percentage and residual value proportion are just a handful of the ratios that would need to be reviewed. So it is with a business. These combinations of ratios can be used to form an opinion on the financial state of affairs at any one time. The best known of these combination ratios is the Altman Z-Score (www.creditguru.com CalcAltZ.shtml), which uses a combined...

The cash flow statement

There is a saying in business that profit is vanity and cash flow is sanity. Both are necessary, but in the short term - and often that is all that matters to a new business as it struggles to get a foothold in the shifting sands of trading - cash flow is life or death. One of the characteristics that most new or small businesses have in common is a tendency to change their size and shape quickly. In the early months and years customers are few, and each new customer (or particularly big order)...

Using business planning software

There are a number of free software packages that will help you through the process of writing your business plan. The ones listed below include some useful resources, spreadsheets and tips that may speed up the process but are not substitutes for finding out the basic facts about your market, customers and competitors BizPlanit.com (www.bizplanit.com free.html) has free resources, including free business plan information, advice, articles, links and resources, a free monthly newsletter, and...

Supplier credit

Once you have established creditworthiness, it may be possible to take advantage of trade credit extended by suppliers. This usually takes the form of allowing you anything from seven days to three months from receiving the goods before you have to pay for them. Even if you are allowed time to pay for goods and services, you will have to weigh carefully the benefit of taking this credit against the cost of losing any cash discounts offered. For example, if you are offered a 2.5 per cent...

Using a local exchange trading scheme LETS

Local exchange trading allows anyone who joins a scheme to offer skills or services, such as plumbing, gardening or the use of a photocopier, to other members. A price is agreed in whatever notional currency has been adopted, but no money changes hands. The system is more ambitious than straight barter. The provider receives a credit on his or her account kept by a local organiser, and a debit is marked up against the user. The person in credit can then set this against other services. The...

Saved 83 million

But money isn't everything, and although we made impressive savings for the businesses that switched to us last year, the reason that they stay is our business banking gives them much more through our entrepreneurial approach. Our range of innovative products along with competitive rates have helped us secure the Business Moneyfacts 'Best Overall Business Bank' award for the last 3 years running 2006-2008 . Get in touch, or visit any Bank of Scotland or Halifax branch and we'll show you how...

Account

You may by now be concerned about the financial situation at High Note as revealed in the preceding chapter. After all the business has sold 60,000 worth of goods that it only paid 30,000 for, so it has a substantial profit margin to play with. Whilst 39,108 has been paid to suppliers, only 30,000 of goods at cost have been sold, meaning that 9,108 worth of instruments, sheet music and CDs are still in our stock. A similar situation exists with sales. We have billed for 60,000 but only been...