BSBR Educational Resources
Asset Turnover
Asset Turnover
Dictionary Definition
This ratio measures a company’s ability to generate sales in relation to total assets. It should be used only to compare firms within a specific industry, and, in conjunction with other operating ratios, to determine the effective employment of assets.
Equation
Why it Matters to You
This ratio can be skewed from the industry norm if you have fully depreciated assets. This could mean that you were able to take advantage of accelerated depreciation. …
Hide and Seek: Where do I Find a Buyer for My Business?
By: Amy LaSala
When I ask business owners who the most likely buyer is for their company, more times than not the answer I get is a local competitor. This may be accurate for small businesses with revenues of less than $500k. However, as your revenue and EBITDA increase the likelihood of knowing or directly competing against your buyer decreases. Increases in financial performance such as revenue and more dramatically EBITDA, also open up the buyer pool to different types of buyers. General…
Profit Before Taxes/Total Assets
Profit Before Taxes/Total Assets
Dictionary Definition
This ratio measures the rate of return on total assets. It can be used as an indicator for management efficiency. This ratio is expressed as a percentage.
Equation
Why it Matters to You
If you have fully depreciated assets this will skew the ratio, making it look like the company is performing above the industry average. This could mean that you were able to take advantage of accelerated depreciation. Or it could mean t…
Profit Before Taxes/Net Worth
Profit Before Taxes/Net Worth
Dictionary Definition
This ratio measures the rate of return on the owners equity. This is expressed as a percentage. It can be used as a measurement of the efficiency of management.
Equation
Why it Matters to You
A high return, normally associated with effective management, could indicate an undercapitalized firm. A low return, usually an indicator of inefficient management performance, could reflect a highly capitalized, conservatively operated bus…
Coincident Indicators
Coincident Indicators
Dictionary Definition
A coincident indicator is a metric that shows the contemporaneous state of economic activity within a particular area. Coincident indicators do not necessarily reflect current conditions because they usually involve some data collection and reporting lag. However, they are important because they show economists and policymakers the recent past state of the economy. Coincident indicators include employment, real earnings, average weekly hours worked i…
Lagging Indicators
Lagging Indicators
Dictionary Definition
A lagging indicator is an observable or measurable factor that changes sometime after the economic, financial, or business variable with which it is correlated changes. Lagging indicators confirm trends and changes in trends.
Plain English
Typical lagging indicators include the duration of unemployment, the ratio of manufacturing and trade inventories to sales, debt ratios, consumer price indices, and several others.
Why it Matters to You
Lagg…
Leading Indicators
Leading Indicators
Dictionary Definition
A leading indicator is any measurable or observable variable of interest that predicts a change or movement in another data series, process, trend, or other phenomenon of interest before it occurs. Leading economic indicators are used to forecast changes before the rest of the economy begins to move in a particular direction and help market observers and policymakers predict significant changes in the economy.
Plain English
Leading indicators are th…
Deflation
Deflation
Dictionary Definition
Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. During deflation, the purchasing power of currency rises over time.
Plain English
Deflation makes the cost of leverage significantly higher. Deflation is commonly associated with a contraction of credit and general monetary supply.
While the general public has a healthy concern for substantial inflati…
Key Opportunity Assessment - Know Where Your Strategy Stands
Blue Sky Business Resources is an advisory firm built by entrepreneurs who have a passion for supporting the most important and underserved segment of our national economy, lower middle market (LMM) privately held businesses. The LMM is generally characterized as the segment of businesses generating between $5M and $50M in revenue, but in investment circles is often defined by EBITDA generation between $2M and $25M. This segment carries a disproportionately large portion of the US GDP production…
Inflation
Inflation
Dictionary Definition
Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time.
Plain English
In practice, inflation is a normal growth state for economies where prices continue to rise, and the purchasing power of currency lags slightly be…