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Erudite AfricaCenter of Excellence
← Financial Management for SMEs: Financial Control and Decision Making

SME Financial Ratios

Module 06 / 6 · 60 min

Calculate and interpret liquidity, profitability, efficiency and leverage ratios from one set of statements, and turn them into decisions and a story a bank will trust.

In this module you will learn to

  • Calculate liquidity ratios and explain why the current ratio alone can mislead
  • Calculate gross, operating and net margins, return on assets and return on equity
  • Calculate DSO, DIO, DPO, the cash conversion cycle and asset turnover
  • Read leverage and debt service ratios the way a lender does
  • Link ratios through DuPont analysis and turn them into actions

Built on

  • Erudite Africa training curriculum: Financial Management for SMEs, Level 2 Intermediate, Financial Control and Decision Making (October 2026)
  • Financial Reporting Proclamation No. 847/2014 and the Accounting and Auditing Board of Ethiopia (AABE) adoption of IFRS for SMEs; Commercial Code Proclamation No. 1243/2021
  • Federal Income Tax Proclamation No. 979/2016 as amended by Proclamation No. 1395/2025, and Council of Ministers Income Tax Regulation No. 410/2017 (depreciation rates)
  • VAT Proclamation No. 1341/2024, VAT Registration Directive No. 1104/2025 and Electronic Invoicing System Administration Directive No. 1142/2026
  • Federal Tax Administration Proclamation No. 983/2016 as amended by No. 1434/2026; Private Organization Employees' Pension Proclamation No. 1268/2022; Labour Proclamation No. 1156/2019
  • Published good practice on 13-week cash forecasting, working capital management, management accounts and spreadsheet controls

Examples and companies are fictional. Tax rates and rules are shown as they stood when the course was written; always check the current proclamations, directives and guidance from the Ministry of Revenues before filing, and take professional advice for your own case.