This page lists formulas for common financial ratios that are useful in Financial Statements. You might use these ratios to assess aspects of financial performance such as liquidity, leverage, growth, margins, profitability, rates of return, valuation and more. Note that the formulas are indicative, as every businesses will have its own naming conventions and groupings.
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Liquidity Ratios
Liquidity Ratios measure a company’s ability to repay both short-term and long-term debt obligations. Common liquidity ratios include the following:
Current Ratio
The Current Ratio, also known as the Working Capital Ratio, measures the capability of a business to meet its short-term obligations that are due within a year. The ratio considers the weight of total Current Assets versus total Current Liabilities. It indicates the financial health of a company and how it can maximize the liquidity of its current assets to settle debt and obligations to suppliers. The Current Ratio formula (below) can be used to easily measure a company’s liquidity.
On a Balance Sheet
[a]. Statement/ Current Liabilities| Info |
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Note about [bal] The [bal] function in Financial Statements references the Balance Sheet, allowing you to select Balance Sheet entities to include in calculations on the P&L. |
Acid-Test Ratio/Quick Ratio
The Acid-Test Ratio, also known as the Quick Ratio, is a liquidity ratio that measures how sufficient a company’s short-term assets are to cover its current liabilities. In other words, the Acid-Test ratio is a measure of how well a company can satisfy its short-term (current) financial obligations.
On a Balance Sheet
([a]-[d])a Current Assets, [d] is Inventories . Statement( Current Assets)]-[bal(Balance Sheet, Inventories)[bal(Balance Sheet, Cash)Cash Ratio
The Cash Ratio, sometimes referred to as the Cash Asset Ratio, is a liquidity metric that indicates a company’s capacity to pay off short-term debt obligations with its cash and cash equivalents. Compared to other Liquidity Ratios the cash ratio is a stricter, more conservative measure because only cash and cash equivalents – a company’s most liquid assets – are used in the calculation.
On a Balance Sheet
[e]/[b]where [e] is Cash and [b] is Current Liabilities.On a Profit & Loss Statement
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Leverage Ratios business Leverage Financial Ratios are used to evaluate a Common leverage ratios include the following:Debt Ratio is a Leverage Ratio that The Debt Ratio is is able to . Statement)]Debt to Equity Ratio ( “debtequity ratio” “risk ratio” “gearing”), is a Leverage Ratio that Debt to Equity Ratio = (short term debt + long term debt) / Shareholders’ Equity. Statement Ratio Ratio is a financial ratio that is used to determine The ratio is .