This important ratio measures your profitability at the most basic level. Your total gross profit total (which is net sales - cost of goods sold) compared to your net sales . A ratio less than one means you are selling your product for less than it costs to produce. If this ratio is remains less than one, you will not achieve profitability regardless of your volume or the efficiency of the rest of your business.

This ratio measures your profitability based on your earnings before interest and tax (EBIT). This measure is used to gauge the efficiency of the business before taking any financing means into account (such as debt financing and tax considerations). This ratio is often used to compare the operating efficiency between similar businesses.

Often referred to as the bottom line, this ratio takes all expenses into account including interest.

Your current ratio helps you determine if you have enough working capital to meet your short term financial obligations. A general rule of thumb is to have a current ratio of 2.0. Although this will vary by business and industry, a number above two may indicate a poor use of capital. A current ratio under two may indicate an inability to pay current financial obligations with a measure of safety.

Also known as the 'Acid Test', your Quick Ratio helps gauge your immediate ability to pay your financial obligations. Quick Ratios below 0.50 indicate a risk of running out of working capital and a risk of not meeting your current obligations. While industries and businesses vary widely, 0.50 to 1.0 are generally considered acceptable Quick Ratios.

This ratio measures the number of times your inventory 'turned-over' during a time period. Generally, the higher this ratio the better your use of inventory. Low numbers indicate a large amount of capital tied up in inventory that may be more efficiently used elsewhere.

This ratio measures the number of times your receivables 'turned over'. The higher the number, the more efficient you are at collecting your accounts receivable. A ratio that is too high or one that is increasing over time, may indicate an inefficient use of your working capital. It is important to compare this ratio to other businesses in your industry.

This ratio helps show how assets are being used to generate profits. One of the most common financial measures, it can be an effective tool to compare the profitability of two companies. If your return on assets is lower than a competitor, it may be an indication that they have found a more efficient means to operate through financing, technology, quality control or inventory management.

Also called the leverage ratio, it is used to help describe how much debt is used to finance the business. While some debt may be prudent, depending on too much debt financing can increase risk.

Working capital is used by a lender to help gauge the ability of a company to weather difficult financial periods. Working capital is calculated by subtracting current liabilities from current assets. Due to differences in businesses and the fact that working capital is not a ratio but an absolute amount, it is difficult to predict the ideal amount of working capital for your business without making use of other financial measures. (Including the Quick Ratio and the Current Ratio.)