Real Numbers Behind Financial Health
Liquidity ratios tell stories that balance sheets can't
We've analyzed thousands of Australian businesses since 2018, and the patterns are clear. Companies that track their cash position weekly survive market downturns 3x longer than those checking monthly. But there's more to it than just watching numbers.
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Quick Ratio Sweet Spot
Aussie businesses with 0.7-1.2 quick ratios show the best growth patterns. Too high means cash sits idle, too low signals trouble ahead.
Average Cash Cycle
Top-performing companies convert inventory to cash in under 18 days. Every extra day costs about 2% of potential profit margin.
Debt Coverage Ratio
Healthy businesses generate 2.4 times their debt payments in operating cash flow. This buffer protects against seasonal dips.
What Numbers Actually Mean
Current vs Quick Ratios
The gap between these ratios reveals inventory quality. Large gaps often predict cash flow problems 6-8 months early.
Working Capital Trends
Monthly changes matter more than absolute numbers. Consistent decline patterns signal operational inefficiencies before they become critical.
Interest Coverage Analysis
Track this quarterly, not annually. Businesses with declining coverage face refinancing challenges even when profitable.
Seasonal Adjustments
Australian retail peaks during December create false liquidity pictures. We adjust for these patterns in our analysis frameworks.
Real insight comes from understanding why ratios change, not just tracking the numbers. Our analysis frameworks help identify the operational decisions driving financial metrics, so you can make adjustments before problems show up in your bank account.
