Your personal financial statements, specifically net worth and the monthly budget, use your financial data to describe an individuals or households financial condition. With some number-crunching, you can calculate personal finance ratios as tools designed to evaluate your financial strength and position. 1.
Like the price to earnings ratio, the current ratio is one of the most famous of all financial ratios. It serves as a test of a company’s financial strength and relative efficiency. For instance, you can tell if a company has too much, or too little, cash on hand.
By tracking your personal financial statements, you can simply calculate all of the above ratios automatically. I strongly suggest that you monitor both your personal finance ratios AND your personal financial statements on a monthly basis. If not, definitely refresh your personal financial ratio analysis every quarter. The 7 most important personal finance ratiosWere all familiar with the money ratio and the income ratio. But there are more than just two ratios that can be used to measure a persons personal finances. The 7 most important financial ratios for personal finance are:1. Debt ratioWhere does all your money go? A debt ratio tells you how many times your monthly income is being spent on debts and how much is left over to be saved. The higher your debt ratio, the less cash you have to spend on the things you want. 2. Net worth