Always Know Where You Stand Financially

Here's a reminder from Art Freedman for readers of Making Money Is Not Illegal, Immoral or Fattening:
"There are only two numbers in your business that I need in order to know pretty much everything about your financial success or struggles. You give me those two numbers and show me your cash flow statement, and I'll tell you where your problems are.
"First, I want to know your final gross margin. That's the percentage margin on your profit for the products in your store, with you subtracting costs of markdowns, freight, all other transportation costs, taxes if applicable, and shrinkage.
"Then I want to know your expense base. That is the percentage of your sales that goes to pay for your payroll, occupancy, and all other expenses. This does not include amortization, depreciation, or payback on most principal debt. The place you'll see payback on principal debt is on the cash flow statement, so that's where I want to look at it.
"What I hear from retailers is, 'Art, our sales are about the same as they were last year. I don't know where the money is going.' I say, 'Well, I don't know where the money is going either, but I'll tell you what. In about half an hour, we can find out where the money is going because I'm going to look at your margins, I'm going to look at your expense base, and I'm going to look at your cash flow statement. With those three, I'll see pretty much everything I need to know about the business.'
"You take your final gross margin, after all markdowns, freight, and shrinkage. You subtract your expense base (payroll, occupancy, and all other). This is your bottom-line profit before taxes."
For the full version, start at page 58 of the book.