03/10/2015
Ratio Analysis – The Hams Approach
Introduction
A sustainable business and mission requires effective planning and financial management. Ratio analysis is a useful management tool that will improve your understanding of financial results and trends over time, and provide key indicators of organizational performance. Managers will use ratio analysis to pinpoint strengths and weaknesses from which strategies and initiatives can be formed. Funders may use ratio analysis to measure your results against other organizations or make judgments concerning management effectiveness and mission impact. We will guide you through The Hams Approach to Ratio Analysis.
For ratios to be useful and meaningful, they must be:
• Calculated using reliable, accurate financial information (does your financial information reflect your true cost picture?)
• Calculated consistently from period to period
• Used in comparison to internal benchmarks and goals
• Used in comparison to other companies in your industry
• Viewed both at a single point in time and as an indication of broad trends and issues over time
• Carefully interpreted in the proper context, considering there are many other important factors and indicators involved in assessing performance.
