As the year draws to a close, many small business owners are taking stock of their business, basking in their successes and trying to comprehend their mistakes. Unfortunately a big picture view does not always immediately reveal itself– a thorough understanding of your business requires at least some analysis and introspection. You may be tempted to look at cash (or lack thereof) in your bank account or your net profit , however these are not always reliable indicators of success or failure , particularly when taken in isolation. Every small business owner should identify the specific needs and constraints of their business to determine the optimal analysis required to assess its financial performance. Some general analysis that most businesses can benefit from are presented below:
Profitability: Compare your current year profit to the prior year and calculate your net profit as a percentage of sales for both the current and prior year to see if you are maintaining or improving upon your financial performance. Ensure that you reflect the following Adjustments:
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