This ratio measures the proportion of internal financing in relation to total financing. It is calculated from the liabilities of the balance sheet.
This ratio must be higher than 0.2. Anything less means that your company is too dependent on external financing for its activities.
Lenders will be sensitive to your self-financing capacity since it indicates your company's capacity to generate resources independently through its activity – for example, by increasing sales.
How to calculate your financial autonomy ratio: Financial autonomy = equity / total balance sheet
Make sure your information is reliable and up-to-date. Remember: your credibility is at stake! So is your reputation. In addition to the numbers, any potential partner will also scrutinise the way in which you manage your staff and go about your day-to-day business.
Tip: Make sure you have home advantage! Try to meet at your company to showcase the atmosphere in your business and the commitment of your staff. These can be hard things to gauge, but they are vitally important and will inform the overall assessment of any potential financial partner.
For more tips and advice on business financial monitoring, download our ebook: Boost your financial performance analysis.