Quick! What's Your Doomsday Ratio?

Ordering info about '101 Business Ratios,' by Sheldon Gates.

By George Gendron | 
 

"To do really cool things in the field of computer communications and make a buck at it."

-- The mission statement of Galacticomm, a developer of multi-user bulletin-board software based in Fort Lauderdale, Fla., and a company that believes you don't need to spend thousands of dollars, hire consultants, and form management committees to write the perfect mission statement

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Anyone who starts a business needs a survival kit, and here's an item I'd be sure to include: 101 Business Ratios (McLane Publications, Scottsdale, Ariz., 1993, $24.95), by Sheldon Gates, the founder and former president of Jensen Tools. It's one of the best introductions to managerial finance I've come across. Gates begins with a lucid discussion of the uses of business ratios and goes on to present 101 of them, organized around six themes -- sales, profit, debt and capital, efficiency, marketing, and investment. The selection is broad, ranging from the tried-and-true (return on assets, sales per employee, current ratio) to the more offbeat (affordable growth rate, the Doomsday ratio, the Olympic model). The concluding chapters explain how to come up with the numbers required to calculate the ratios and, equally important, how to compare your company's ratios with those of similar businesses.

By the way, the Doomsday ratio is cash divided by current liabilities. If yours is zero, you are probably playing it a little too close to the edge.

You can order 101 Business Ratios from the publisher by calling 800-949-1555; there is a $2 charge for postage and handling.

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