Every financial manager or business owner strives to know
where the sales or revenues are at. The life blood of any business is sales
which translate into cash flow. In many cases, and certainly it's not a good
thing, as other issues such as rising interest rates, material costs, and, in
general, overall solvency can be masked or hidden temporarily by the revenue or
sales growth .
In the context of other aspects of the business, sales revenue
needs to be studied by the business owner. To enable the business owner from
the viewpoint of ratios to understand overall financial importance there are
some ways to look at sales. Sales have been referred to as the lifeblood of the
company. Thus, to the toolkit of understanding the business, that meaningful Salesinventory analysis should be a great additional.
Growth viewpoint is the easiest and most basic way to
view sales. The calculation is very simple. The sales revenue of the year,
minus sales revenue last year, and divided by sales revenue last year - by
multiplying that by 100 percentage of sales growth number is calculated. Hopefully
achieving upward sales growth the calculation is best charted in the context of
a company. The overall number becomes much more meaningful over a number of
years, when a business owner plots or charts this number over a longer period. The
company might be doing a bit more poorly when inflation is taken into account, if
sales growth is flat.
There is a danger of fast growth to the companies.
Therefore, based on their current financial position, business owners might
want to calculate the rate of their growth. The calculation goes this way. To
get the calculation in percentage the gross income of the company divided by
last years retained earnings, and then multiplied by 100. The firm might not be
able to sustain this growth, if the growth rate in sales is faster than our
affordable growth rate. That is of course as receivables; Sales inventory analysis and
assets that need to be financed will be needed by the company.
