Unfortunately, cash flow problems are frequent for small and medium-sized businesses and debt collection by a professional is often neglected.
These problems can arise for a variety of reasons, such as unpaid invoices, a drop in business or unexpected expenses. In these situations, it is essential to analyze the financial health of the company using key financial ratios.
Financial ratios are indicators used to evaluate the financial performance of a company. They are used to measure a company's ability to generate profits, manage debt and maintain a positive cash flow. Here are the 2-3 most important ratios for evaluating a company's cash flow:
- The current ratio: This ratio measures the company's ability to meet its short-term debts. It is calculated by dividing total current assets by total current liabilities. A ratio of less than 1 indicates that the company may have difficulty paying its current liabilities.
- Inventory turnover ratio: This ratio measures how quickly the company turns its inventory into sales. It is calculated by dividing the cost of sales by the amount of inventory. A high ratio indicates that the company is able to sell its inventory quickly, which can improve its cash flow.
- Days sales outstanding ratio: This ratio measures the time it takes for the company to collect its trade receivables. It is calculated by dividing the amount of trade receivables by the daily sales. A high ratio indicates that the company may have difficulty collecting its accounts receivable on time.
If the analysis of these ratios reveals a difficult situation for the company, it is time to find solutions to improve the cash flow. In this context, the online debt collection platform Legalcity.fr can be a fast and efficient solution for small and medium sized companies.
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By using the debt collection platform Legalcity.fr, small and medium sized businesses can benefit from a fast and efficient solution to their cash flow problems. By entrusting their debt collection to professionals, they can recover their money quickly and improve their cash flow to face financial challenges.