two partners are running a car accessories shop that mostly imports products from China. There are many similar shops in the same street and everybody is complaining of lack of sales. In the last week of December, his partner calculated some ratios that would help show the financial position of their business. his partner hates maths and doesn’t understand anything about accounting. He has come to you for help. Explain the following to him:
the partner has an Average Inventory Turnover Ratio = 1.23/yr. Explain to him what that means?
What are the three basic financial statements an entrepreneur must understand and explain what each one shows?
What do the different types of liquidity ratios show?
Why does an entrepreneur need to calculate a break-even point?