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Financial Ratios Calculator

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Financial Ratios Analysis Calculator

Initial Data


Insert numbers from balance sheet and income statement.

Current Assets
$
incl.
– Cash and equivalents
$
– Marketable securities
$
– Inventories
$
Fixed Assets
$
Total Assets
$
Current Liabilities
$
Total debt
$
Total equity
$
Net Sales
$
Operating Income
$
Net income
$

     

Profitability Ratios iProfitability Ratios are used to determine return earned by the businesses.


Operating Margin: iThe operating margin ratio, also known as the operating profit margin, measures what percentage of total revenues is made up by operating income. It shows how much revenues are left over after all the variable or operating costs have been paid. This is important to both lenders and investors because it can reveal how strong and profitable a company’s operations are. Higher the Gross Profit Margin, better the business health.
 
Profit Margin: iThis ratio is calculated as Net Profit divided by Sales. Net Profit Margin is measured in percentage of revenue remaining after all operating expenses, taxes, interest have been subtracted from revenues. A higher margin is always better than a lower margin because it means that the company can translate more of its sales into profits at the end of the period.Higher the Net Profit Margin, better the business health.
 
Return on Assets (ROA): iThis ratio measures how profitable a company’s assets are. It shows how efficiently a company can manage its assets to produce profits during a period. It helps both teams and investors to see how well the company can convert its investments in assets into profits.
 
Return on Equity (ROE): iThis ratio shows how much profit each dollar of common stockholders’ equity generates. For example, a return on 1 means that every dollar of common stockholders’ equity generates 1 dollar of net income.
 
Fixed Asset Turnover: iThis efficiency ratio measures a company’s return on their investment in property, plant, and equipment by comparing net sales with fixed assets. It calculates how efficiently a company is at producing sales with its machines and equipment.
 
Total Asset Turnover: iThis measures how much revenue a company generates from every dollar of the total assets.
 

Liquidity Ratios iLiquidity ratios measure the liquidity position to meet short term obligations (current liabilities) of the business. Most commonly used liquidity ratios are as follows:


Current Ratio: iThis ratio is calculated as Current Assets (assets expected to be consumed or converted to cash within one year) divided by Current Liabilities (liabilities coming due in one year). This ratio should be between 1.2- 2, A ratio of 2 means that company has 2x more current assets than liabilities to covers debts. A current ratio below 1 means that the company doesn't have enough liquid assets to cover its short-term liabilities. Generally, higher the ratio, better it is for business health.
 
Quick Ratio or Acid-test Ratio: iQuick Ratio is more stringent in measuring liquidity position as compared to current ratio. This ratio takes into account quick assets instead of current assets in the numerator by removing inventories. Quick Assets include Cash & Cash Equivalents, Marketable securities and Net Receivables as they can be converted to cash more quickly. Lenders look at the quick ratio because it can show a company’s ability to pay off loans under the worst possible condition. Lower quick ratio implies liquidity crunch. (*note this ratio is best used when benchmarked to company’s specific industry) Generally, higher the ratio, better it is for the business health.
 
Cash Ratio: iThe cash measures a firm’s ability to pay off its current liabilities with only cash and cash equivalents. Lenders like the fact that inventory and accounts receivable are left out of the equation because both of these accounts are not always available for debt servicing. They also look to see if a company maintains adequate cash available to pay off all of their current debts when due. A ratio of 1 means that the company cash and equivalents are the same amount as current debt. This means that in order to pay off current debt, the company would have to use all of its cash and equivalents. This ratio should be above 1.
 

Debt Ratios:iThese ratios can be used to measure the ability of a company to meet its long-term debt/obligations.


Debt to Equity (D/E):iThe Debt to Equity ratio calculates the weight of total debt and financial liabilities against shareholders equity. Debt to Equity Ratio is calculated by Total Debt divided by Total Equity. Lower level of this ratio is better for businesses.
 
Debt to Assets (D/A):iThis ratio indicates the percentage of assets that are being financed with debt. Total Equity divided by Total Debt is a formula used to calculate this ratio. Lower level of this ratio is better for businesses. This ratio is commonly used by creditors to determine the amount of debt a business possess.
 
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