WEEK 10 – Is my business in a good financial position to survive a downturn?
The debt to equity ratio shows the proportion of capital invested by the business owners to the funds provided by external lenders.
Generally, a debt to equity ratio in the range of 1:1 TO 4:1 (ie., a maximum of $4 debt for every $1 of owner’s equity) is acceptable but will depend on individual business and industry circumstances.
Too much debt means you may be putting extra stress on the business in the event of an economic downturn.
Discuss these concepts with your accountant.
Should you believe any of the above apply to you please contact Andrew Marshall or Janine Orpwood at Langley McKimmie Chartered Accountants on (03) 5427 8100 for an initial consultation.