Financial Ratio Calculator
The key ratios from one balance sheet and income statement, each explained in plain words.
DuPont: where the return on equity comes from
Liquidity
Leverage and debt service
Efficiency
Returns
Results are estimates for general information and planning, not financial advice. Banks and institutions may calculate differently (rounding, fees, rate changes). Confirm figures with your lender or a qualified adviser before deciding.
About the Financial Ratio Calculator
Ratio analysis turns a balance sheet and an income statement into numbers you can compare from year to year and with other businesses. Enter the figures once and the calculator works out four groups of ratios: liquidity (current, quick and cash ratios, net working capital), leverage and debt service (debt to equity, debt to assets, financial leverage, interest coverage and the debt service coverage ratio lenders use), efficiency (asset, receivable, inventory and payable turnover and their days, the cash conversion cycle) and returns (ROA, ROE and ROCE).
The DuPont breakdown splits the return on equity into the net margin, the asset turnover and the leverage that produce it, and every ratio comes with the formula filled in with your numbers and a sentence on what it means. Enter the start of the period too and the turnovers and returns use averages, as analysts do; a part-year income statement is turned into yearly figures. Nothing leaves your browser.
How to use it
- Enter the balance sheet at the end of the period: current assets (cash, short-term investments, receivables, inventory, other), non-current assets, current liabilities (payables, short-term borrowings, other), non-current liabilities (long-term borrowings, other) and total equity. The totals and a balance check update as you type.
- Tick I also have the start of the period to enter the opening balance sheet: turnovers and returns then use averages.
- Enter the income statement: the period it covers, revenue, cost of goods sold, operating profit (EBIT), interest, net profit, depreciation and amortisation, and the loan principal due in the period for the DSCR. Choose how the DSCR counts the cash available.
- Read the headline ratios beside the form, the DuPont breakdown and the four ratio tables with their formulas and meanings.
- Copy the summary or download every ratio as CSV.
Examples
Current assets 750,000 (cash 120,000, investments 30,000, receivables 250,000, inventory 300,000, other 50,000) Current liabilities 400,000 · long-term borrowings 500,000 · short-term borrowings 100,000
Current ratio 750,000 ÷ 400,000 = 1.88 · quick ratio 1.00 Debt to equity 600,000 ÷ 1,000,000 = 0.60 ROA 9% · ROE 18% · ROCE 300,000 ÷ 1,600,000 = 18.75%
Net margin 180,000 ÷ 3,000,000 = 6% Asset turnover 3,000,000 ÷ 2,000,000 = 1.5 Financial leverage 2,000,000 ÷ 1,000,000 = 2.0 ROE = 6% × 1.5 × 2.0 = 18%
Interest coverage 300,000 ÷ 50,000 = 6.0× DSCR (lenders’ basis) (180,000 + 100,000 + 50,000) ÷ (50,000 + 100,000) = 2.20 DSCR (EBITDA basis) 400,000 ÷ 150,000 = 2.67
Common uses
- Review a year’s accounts before a meeting with your bank, an investor or the board.
- Check the ratios a loan application or a covenant asks for: DSCR, interest coverage, debt to equity, current ratio.
- Compare two companies, or two years of one company, on the same definitions.
- Teach or learn ratio analysis with the formulas filled in with real numbers.
The ratios
- Liquidity: current ratio = current assets ÷ current liabilities; quick ratio = (cash + short-term investments + receivables) ÷ current liabilities; cash ratio = (cash + short-term investments) ÷ current liabilities.
- Leverage: debt to equity = (short-term + long-term borrowings) ÷ equity; debt to assets = debt ÷ total assets; debt to capital = debt ÷ (debt + equity); financial leverage = average total assets ÷ average equity; interest coverage = EBIT ÷ interest expense.
- Efficiency: total asset turnover = revenue ÷ average total assets; fixed-asset turnover = revenue ÷ average property, plant and equipment; receivables turnover = revenue ÷ average receivables; inventory turnover = cost of goods sold ÷ average inventory; payables turnover = purchases ÷ average payables; days = days in the period ÷ turnover; cash conversion cycle = days of inventory + days of sales outstanding − days of payables; working-capital turnover = revenue ÷ average working capital.
- Returns: ROA = net profit ÷ average total assets; ROE = net profit ÷ average equity; ROCE = EBIT ÷ capital employed (total assets − current liabilities).
These follow the activity, liquidity, solvency and profitability ratios of the CFA Institute’s Financial Analysis Techniques reading. ROCE and the DSCR are given in the forms lenders and analysts commonly use. Profit margins in detail are in the profit calculator.
DuPont: where the return on equity comes from
ROE = net profit ÷ revenue × revenue ÷ average total assets × average total assets ÷ average equity
The three parts multiply back to the ROE exactly, and each points to a different lever: margin (pricing and costs), asset turnover (how much revenue the assets generate) and financial leverage (how much of the assets borrowing pays for). Two businesses with the same 18% ROE can get there very differently — a 3% margin turned over 3 times with leverage of 2, or a 9% margin with an asset turnover of 1 and the same leverage. A higher ROE from more leverage also means more risk: the debt has to be serviced in bad years too.
Averages or the end of the year?
Ratios that compare a flow over the period (revenue, profit) with a balance (assets, equity) are best worked out on the average balance, because the balance changes during the period: a business that raised capital in the last week of the year would otherwise look less profitable than it was. Enter the start of the period and the calculator averages the two; without it, it uses the end of the period. The balance-sheet ratios (current, quick, debt to equity) describe one date and always use the end of the period.
For a half-year, a quarter or a month, turnovers and returns are turned into yearly figures (× 365 ÷ days); the days ratios use the period itself.
The debt service coverage ratio
The DSCR compares the cash available to pay lenders with what is due to them in the period: interest plus loan principal. Lenders count the cash available in one of two ways, and both are offered:
- Net profit + depreciation and amortisation + interest — the way many banks work it out for business loans, after tax;
- EBITDA (EBIT + depreciation and amortisation) — before tax.
Below 1, the cash available does not cover the payments due. Lenders set their own minimum in the loan terms; check yours. A bank’s project or CMA assessment works out the DSCR year by year for the life of the loan.
Reading ratios well
- Compare a ratio with the same business in earlier periods and with businesses in the same industry: a supermarket and a software company have very different healthy turnovers and margins.
- Look at the ratios together: a high current ratio with slow receivables and slow stock is not strength.
- One-off items (an asset sale, a write-off) move profit-based ratios; seasonal businesses look different at other dates.
- Definitions differ between sources — whether leases count as debt, what counts as cash — so use the same definitions when you compare.
Limitations
- The ratios are only as good as the figures entered; one-off items, seasonality and accounting choices (leases, revaluations) move them.
- Debt counts short-term and long-term borrowings; add lease liabilities to long-term borrowings if you treat them as debt.
- A part-year income statement is annualised in a straight line, which a seasonal business does not follow.
- There are no built-in good or bad levels: compare with your own history, your lender’s terms and similar businesses.
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Frequently asked questions
What are the main financial ratios?
Four groups: liquidity (current, quick and cash ratios), leverage (debt to equity, interest coverage, DSCR), efficiency (asset, receivable, inventory and payable turnover and their days) and returns (ROA, ROE, ROCE). This calculator works out all of them from one form.
How does the DuPont analysis break down ROE?
ROE = net profit margin × asset turnover × financial leverage. With a 6% margin, revenue 1.5 times the assets and assets twice the equity, ROE = 6% × 1.5 × 2 = 18%.
What is a good debt-to-equity ratio?
It depends on the industry and how steady the cash flows are: utilities and property businesses carry more debt than software or consulting firms. Lenders look at it together with interest coverage and the DSCR — whether the profit and cash can carry the debt.
What is the difference between ROE and ROCE?
ROE divides net profit by the owners’ equity. ROCE divides operating profit (before interest and tax) by the capital employed — total assets less current liabilities, which is equity plus the long-term liabilities — so it measures the returns of the business before the effect of how it is financed.
How do lenders calculate the DSCR?
Many divide the cash available for debt service — net profit + depreciation and amortisation + interest — by the interest and principal due in the period; others use EBITDA. Choose the basis under the income statement; the result shows both formulas filled in.
Why are my ratios different from a published report?
Analysts use slightly different definitions: year-end or average balances, debt with or without leases, total or interest-bearing liabilities. Check the definition behind each figure: here every formula is shown with your numbers.