engleski

Financial ratios as an evaluation instrument of business quality in small and medium-sized enterprises

Small and medium-sized enterprises have been recognized as a separate but very important economic discipline. SMEs prepare financial statements usually for external users, primarily to meet tax regulations and legislations. Internal reports, on the other hand, are under-represented or non-existent. This means that accounting information is insufficiently used in decision-making processes and management of small and mediumsized enterprises. The more intensive explanation of internal reports could intensify financial position and business performance. They are one of the prerequisites for longterm growth and development of enterprises. In that sense, the importance of financial statement analysis needs to be stressed. Principal tools and techniques of financial statement analysis are well recognized. However, financial statement analysis is certainly not confined to horizontal and vertical analysis. Financial ratio analysis is of extreme importance. They are widely accepted in business practice of large companies, primarily because of the simplicity of its calculation and use. Bearing that in mind, the subject matter and objective of this paper is to indicate the trends and dynamics of some of the most important financial ratios of financial position and business performance of SMEs in the Republic of Croatia. Based on the obtained results, the quality of business performance will be evaluated for this important economic discipline.

financial ratios; business quality; SMEs

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