Closing a credit card once you’ve paid it off might seem like the right decision, particularly if you’ve carried debt beyond your comfort level. Even if you’ve recently paid off a high-revolving balance, it may not be the best strategy, especially if you are trying to improve your credit score as a business owner.

Instead of making a quick judgement call that could impact your credit, it’s best to figure out if closing a credit card is the right decision or not.

Questions to ask before closing a credit card.

Will you spend beyond your comfort level again?

Make sure to examine the behaviors that got you into debt in the first place to avoid it happening again.

Are you worried about identity/card theft?

While this is a possibility, as of September 21 you will be able to freeze your credit for free, regardless of the state you live in. Since creditors have to access your credit history in order to open accounts in your name, a credit freezes can make it harder for identity thieves to affect you financially. You can then easily remove it if you’re applying for a mortgage, loan, or new credit card.

Is there an annual fee?

If there is, it might make sense to cancel it, especially if you don’t intend to use the credit card again. Keep in mind, even if you close your credit card with a zero balance, it will likely remain on your credit report for seven to 10 years.

As long as there isn’t an annual fee, many experts recommend cutting up the credit card or even freezing a card in a block of ice so it can only be used for emergencies. Then delete the credit card information from any online stores like Amazon.com, Target.com and other retailers so it can’t be easily accessed or used.

How long have you had the credit card?

Credit history matters. The longer you’ve had your credit card, the more reporting credit bureaus tend to like it.

How your credit score may be impacted

Closing a credit card may hurt your credit score since it reduces the amount of your total available credit. Credit bureaus look at the ratio of how much you owe on a credit card compared to your credit limits. Most credit bureaus consider any credit card debt over 30 percent of your limit to be a high balance.

Here’s an example of how credit card utilization works. Let’s say you have $25,000 in credit available on four credit cards. You have cards that have $10,000, $7,500, $5,000 and $2,500 limits. If you have $5,000 in credit card debt among all four cards then you’re using 20 percent of your total credit card utilization.

If you decided to close the credit card with $10,000 credit limit on it, even if you aren’t using the card and are carrying a zero balance, then your total credit card utilization jumps to 33 percent.

Besides looking at your total credit card utilization among all accounts, creditors will also look to see how much credit you are using on each individual credit card compared to the available credit. This is known as your per-credit card utilization.

For example, if you have a credit card limit of $10,000, to stay at or below that 30 percent threshold you shouldn’t charge — or utilize — more than $3,000 a month on that card. Keep in mind, even if you charge more and pay off the balance each month, depending on when the credit bureaus report, it could still impact your credit score. This is one reason why some people pay off their charges before the bill is due, to keep their per-credit card utilization below that 30 percent threshold at any time. Creditors often see you as a more creditworthy borrower if you stay below that amount.

Closing a credit card and credit utilization ratio

When you close a credit card, it increases your total credit utilization ratio — meaning you have to carry lower balances, even if you pay off the bill each month, to stay below the 30 percent limit.

Keeping a credit card account open, even if you don’t intend to use it, may help to improve your credit score by lowering your credit card utilization ratio. If you’re not comfortable keeping a credit card open, you can always close one card and request a credit limit increase for another card to help maintain a lower credit card utilization ratio.

When it comes to entrepreneurship, inheriting knowledge at the dinner table may play a big role.

In their research paper, “Dinner Table Human Capital and Entrepreneurship,” Hans K. Hvide, professor of economics at the University of Bergen in Norway and Paul Oyer, professor of economics at Stanford’s graduate school of business studied how fathers discuss their work with their sons.

Although the study only looked at male entrepreneurs — approximately 3,800 young and middle-aged Norwegian men (22-45 years old) — it found several key insights that help all small business owners and entrepreneurs.

Inherited industry knowledge can help.

The concept is simple: if parents have in-depth conversations about their work while eating a family meal, they often pass their business knowledge along to their children. Their kids become more likely to understand industry-specific nuances, which may give them a boost if they become an entrepreneur.

Despite the old adage that it is “Not what you know, but whom you know,” the truth may be that what you know is because of whom you know.

Researchers found that if an entrepreneur started a firm in the same industry as his father’s, the person tends to outperform entrepreneurs in the same industry whose fathers did not work in that industry.

Although the researchers concede some of the success could be due to greater awareness of a parent’s specific industry, general parental pressures or expectations to enter that type of business, as well as similar business interests, they also found something else.

The researchers point to having parents having “dinner table conversations,” which can potentially give children a boost if they go into business in the same or a closely related field. Having that inherent proficiency can also make someone more likely to innovate and become an entrepreneur within that industry.

The funeral business, for example, is an industry that has historically been dominated by family businesses where the next generation of undertakers usually learn the trade from their parents. Typically that means when a new funeral home is opened, an entrepreneur who learned the business as part of growing up will have an advantage over someone who did not acquire the relevant institutional knowledge from family members, the researchers says.

More upfront capital and employees, better long-term results.

The researchers also found these businessmen, who listened to their fathers talk shop, were also more likely to substantially invest a larger amount of initial capital, more likely to have a larger number of employees, and more likely to survive the first four years.

That made these entrepreneurs “positive outliers” the study found because of their large number of employees or high assets.

Use on-the-job conversations.

Surprisingly, many successful entrepreneurs worked in the same industry as their parents, but they used on-the-job observations and conversations, not financial help.

Eighty-four percent of entrepreneurs who started a firm were in the same industry or a closely related one to their fathers’ employment. They reported that they acquired industry knowledge from their parents. The most common method: having conversations at home and observing parents at work to learn the right type of “human capital,” the economic value of a person’s skill sets.

Surprisingly, what wasn’t as common was obtaining help from parents through cheap labor or access to important networks.

Institutional knowledge may counter the Amazon effect.

At a time when more customers are shopping online and retailers and box stores need to counter the Amazon effect, having generational institutional knowledge can make a big difference. It doesn’t matter if you work within professional services, hospitality or medical practice industries.

Track customer behavior and then combine that information with historical knowledge. Offering a more personalized, tailored service can also help, according to a Forbes story “What The Amazon Effect Means for Retailers.”

That’s because price matching online retailers, while offering superior customer service can make a big difference in creating a long-term relationship.

Sue Smith, store manager of Baker Book House in Grand Rapids, Michigan told the CBA, the Association for Christian Retail she will price match Amazon all day long with the philosophy: “Don’t send away empty-handed a customer who is standing right there. ‘I always say to my team that it’s not about the transaction in front of you. It’s about the next one, and the next one, creating an experience where you are inviting them to come back again.'”

Sometimes, going out on your own in a new industry is preferred.

Even if you have insider knowledge, the dinner table capital study also found something else, high-IQ entrepreneurs were more innovative and more likely to strike out on their own in search of greater financial success.

Think of Google and Facebook as well as other technology-based startups that have typically been successful because the founders had an innovative idea for a new product concept, the researchers say.

“The founders of these companies could not have learned the trade from their parents – search engines and social networks did not exist,” the researchers say. “Their natural intelligence and education allowed them to create companies based on innovative ideas.”

Gaining industry knowledge from others.

Unfortunately, not everyone has a relative with the business expertise you need. If you don’t have a parent who has industry knowledge, networking with those who do might be a good way to make up some lost time.

Harvard Business Review offers some great insights in its “When You Agree to a Networking Meeting But Don’t Know What You’re Going to Talk About” article.

First, be clear on your reasons you’re asking for (or accepting) a business meeting. Specifically state if you’re looking to gain information and learn more about the field; or if you would like to discuss long-term business goals in the hopes of potentially collaborating; or if you would like to have a more social discussion to get to know the person.

Next, give a variety of options to set up the length of time and duration to have a conversation This can range from a 30 or 60 minute phone call, grabbing a coffee or a meal, or attending a larger group event like a cocktail reception.

Then, prepare ahead of time to make sure you’re asking the right questions.

If you’re giving advice, ask “How can I be most helpful?” If you’ve asked for the meeting, ask specific questions about the person’s area of expertise ranging from the hiring process to the most exciting projects the person has worked on.

Finally, don’t treat the meeting as a one-off. Follow-up after the initial conversation to establish a connection to help solidify your relationship.

It doesn’t make up for years of dinner table conversation, but it’s a good way to start catching up.

Nobody’s buying? The Surprising Reasons for Poor Inventory Turnover

Laurena Reisman, founder of Mishy Moo Pets, periodically takes a close look into items that aren’t selling well on her online pet store. When that happens, she says in an article for iQuoteExpress, she pings previous buyers to get their opinion on the slow-sellers; compares her pricing to competitors; and, most importantly, makes sure that her search engine optimization (or SEO) is still relevant. Prospective customers may be desperately searching for a particular dog collar Reisman carries. But the search engines might not realize she has it in stock.

The reasons inventory isn’t turning over can be complex, critical and illuminating in their metrics. Determining how many times a company has sold and replaced its inventory over a particular period, such as a year can be daunting.

Doing the math

The specific calculation is the cost of goods sold divided by the average inventory. The web site Accounting Explained shows how to calculate inventory turnover ratio using the theoretical example of ABC Company. In this example, ABC has opening inventories of $25,000; closing inventories of $30,000; and a cost of goods manufacturing of $245,000.

The math works like this:

Cost of goods sold = $25,000 + $245,000 – $30,000 = $240,000 Average inventories = ($25,000 + $30,000) ÷ 2 = $27,500 Inventory turnover ratio = $240,000 ÷ $27,500 = 8.73

Check your competitors

You might wonder whether an inventory turnover ratio of 8.73 is a cause for concern or celebration. That depends on the industry. For example, supermarkets, which sell perishable goods, will inherently have a higher turnover ratio than a company with a pricier, slow-moving product, like an automobile dealership.

For that reason, as Accounting Explain points out, WalMart needs to evaluate its inventory by comparing its ratio against direct competitors like Costco.  Knowing the inventory turnover of a manufacturer like John Deere doesn’t tell WalMart if it’s managing inventory efficiently. Nor does it show if sales have slowed and goods are overstocked,

By benchmarking your ratio to competitors, you may discover many insights. For example, you can determine whether your sales and procurement departments are working in sync. The ratio may also alert you that you might be a little too stingy when it comes to inventory. “Sometimes a very high inventory ratio could result in lost sales, as there is not enough inventory to meet demand,” explains Investopedia.

Maintaining your inventory turnover ratio at the right level can keep your business running profitably and well. It lets you know changes you might address that may otherwise escape your attention.

Editor’s Note: This is one of an eight-part series about key financial terms all entrepreneurs should know.

Current ratio is an important liquidity ratio that investors and potential investors care about — which means business owners need to care about it, too. Here’s the break down of what you need to know along with expert advice on what your current ratio says about your business.

What is current ratio?

The current ratio, also known as the working capital ratio, measures a company’s ability to pay off its short-term liabilities with its current assets. In other words, it’s a barometer of how much the working capital you have on hand is earmarked for payments. To calculate your current ratio, divide your current assets by your current liabilities.

Why is current ratio important?

Current ratio, taken together with other liquidity ratios, offers investors a snapshot into how your company may perform for the immediate future. Generally speaking, the higher the ratio, the more working capital, the better the company’s health. A ratio below one means a company has more liabilities (debt) than assets. In industries where companies have a lot of assets tied up in inventory, like retail for example, ratios are typically lower.

How can current ratio impact your ability to raise capital?

Current ratio is one of many ratios a potential investor will examine when making a funding determination. Because of the variance of payment terms from industry to industry, current ratio alone is not enough to make a funding decision.

As an entrepreneur, it may help to understand how your current ratio compares to other companies within your industry, and what factors in the near- and medium-term future might impact it significantly. For example, if you’re about to take on a significant amount of debt, or get extended payment terms with a supplier that will shift debt from your short-term to your long-term obligations on your balance sheet, your current ratio might change substantially. Be prepared to answer questions about these or other possibilities when discussing your current ratio with your CPA or CFO.

Strategic Funding asks an expert about current ratios:

In our interview with accounting professional Brad Shanahan, COO/CFO of VitaPerk – the world’s first nutrient coffee enhancer – he breaks down the importance of current ratio and gives startups a bar for which they should aim.

Why is the current ratio an important barometer of a company’s health to potential investors?

Brand Shanahan: The current ratio identifies a company’s ability to pay back its liabilities with its assets, or in other words, its liquidity. The current ratio gives a sense of the efficiency of a company’s operating cycle, its ability to turn its product into cash and its ability to pay its debts.

Is there a current ratio range startups should target to increase long-term viability?

Brad Shanahan: A good range is between 1.2 to 2. A ratio equal to 1 indicates that current assets are equal to current liabilities and that a company is just able to cover all of its short-term obligations, so you want to be above that. A current ratio of 2 is ideal.

What’s next?

How would you rate your financial-terms literacy? There are many more ratios it helps to be “current” on if you plan to raise money in the near future. Don’t forget to check out part 1 of this series, which focuses on Debt-to-Income Ratio.