Need of Financial Health Check
The ratios for the analysis of personal financial statements need to be considered in light of an individual’s situation rather than as a set standard for everyone. As in corporate world the ratios vary from company to company and industry to industry, and also between companies operating in the same industry because of scale of operation or management functioning.
Likewise, ratios generated by the personal financial statement of individuals are likely to be different and should be evaluated in light of the individual’s circumstances and positioning.
The following five factors need to be considered when interpreting a client’s personal financial statement ratios:
- Life Cycle.
- Family Status.
- Economic Status.
- Economic Environment.
- An Individual’s Objectives and Preferences.