A lack of operational efficiency leads to smaller profits and weaker growth. Operational efficiency measures how well you're using the company’s resources. This is what remains for reinvestment into your business and for distribution to owners in the form of dividends. Net profit margin (revenues – cost of goods sold – operating expenses – all other expenses) ÷ revenues.This determines your company’s ability to make a profit regardless of how you finance operations (debt or equity). Operating expenses don't include interest or taxes. Operating profit margin (revenues – cost of goods sold – operating expenses) ÷ revenues.A healthy gross profit margin allows you to absorb shocks to revenues or cost of goods sold without losing the ability to pay for ongoing expenses. Gross profit margin (revenues – cost of goods sold) ÷ revenues.If you can't produce quality profits consistently, your business may not survive in the long run. Many highly successful companies achieve over $1 million in annual revenue per employee. This ratio measures your business's productivity. Revenue per employee (revenue ÷ average number of employees).No client should represent more than 10 percent of your total revenues. If a single customer generates a high percentage of your revenues, you could face financial difficulty if that customer stops buying. Revenue concentration (revenue from client ÷ total revenue).When calculating revenue growth, don't include one-time revenues, which can distort the analysis. Revenue growth (revenue this period - revenue last period) ÷ revenue last period.The quantity, quality and timing of revenues can determine long-term success. Revenues are probably your business's main source of cash. A proper analysis consists of five key areas, each containing its own set of data points and ratios. The first step toward improving financial literacy is to conduct a financial analysis of your business. Financial health is one of the best indicators of your business's potential for long-term growth.

How to analyze financial statement