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Financial ratios are quantitative measures used to assess the performance and the overall financial health of a business. The end goal of using ratio analysis is to improve the decision making process. Ratio analysis not only compares similar companies against each other, but also can be used to track the performance of a company year to year. In this article I classify the financial ratios into five categories: profitability, leverage, liquidity, efficiency and growth. Profitability Ratios Profitability ratios are financial metrics used to...

The Estate Tax, often a critical concern in estate planning and tax law, is set for significant changes in 2026 due to the sunset provision of the Tax Cuts and Jobs Act (TCJA) of 2017. This act, which temporarily doubled the federal estate and gift tax exemption amount, is slated to revert to its pre-TCJA levels, adjusted for inflation, at the end of 2025. In 2024, the estate and gift tax exemption is $13.61 million per individual, up from $12.92 million...

In the first part of the Best Way to Sell Your Business, we talked about why you should start to think about your exit strategy. In this final part, we work through the specific steps to get going. Step One: Obtain A Current Business Valuation A business valuation provides you with a snapshot of your company's current value. Many business owners estimate value based on guesswork or revenue multiples paid for transactions in their industry. While this may occasionally align with what...

For many business owners, a significant portion of their net worth is tied up in the value of their business, business, yet many lack a concrete exit strategy. It's not uncommon for business owners to view their company primarily as an income source (perhaps for family members as well as themselves), a job, or a "cash cow," rather than what it truly is: an investment, and likely their most valuable asset. While these same business owners may dedicate time to...

What is the Cash Conversion Cycle: it measures how quickly a company converts cash into more cash. Keeping on top of your accounts receivable and payables is essential in an inflationary environment. While official government measures show inflation around 3 percent, the reality feels a lot different at the gas pump and with our vendors. Many business owners also will be painfully aware that financing rates are much higher than they were several years ago. The Impact of Inflation Inflation can significantly...

Dear readers, We continue the excellent article by Alina Niculita, CFA, ASA. I was about to write a post on the same topic, and she summed it up perfectly. Click here for Alina's other articles. This post first appeared in the Portland Business Journal on July 12th, 2019. It’s impossible to value "blue sky” Business valuation is sometimes perceived as more of an art than a science, especially when the business subject to valuation has more “blue sky” compared to hard assets. “Blue...

Dear readers, Today's post features an article by Alina Niculita, CFA, ASA. I was about to write a post on the same topic, and she summed it up perfectly. Click here for Alina's other articles. This post first appeared in the Portland Business Journal on July 12th, 2019. Myths and truths about business valuation While most people understand real estate appraisal, the same cannot be said about business appraisal or business valuation. Real estate appraisal makes sense because it puts a price on houses...