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]/[b] where [a] is Current Assets and [b] is Current Liabilities.
On a Profit & Loss Statement
[bal(Balance Sheet, Current Assets)]/[bal(Balance Sheet, Current Liabilities)]
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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. The main use for this is calculating financial ratios. The [bal] function calculates an average of the Balance Sheet account group based on the start and end dates of the P&L. E.g., if Current Assets are being included on a Profit & Loss statement for the period January to June, [bal] will average the Current Asset values as at the end of December and as at the end of June. This takes into account any material movements in Balance Sheet groups during that period. |
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])/[b] where [a] is Current Assets, [d] is Inventories and [b] is Current Liabilities.
On a Profit & Loss Statement
([bal(Balance Sheet, Current Assets)]-[bal(Balance Sheet, Inventories)]) Ratio[bal(Balance Sheet, Cash)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
Ratio business . profit Statement Ratios the ability of of time utilises to shareholders Goods Sold.. gross profit is a profitability ratio that compares the of a company how much profit makes prior to . Margin is a profitability or performance that , prior to & . measure the profitability of a business it’s efficiently utilising . Note the [DaysInPeriod] and multiplication by 365 produces annualised profit.Info |
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Note about [DaysInPeriod] The [DaysInPeriod] function, often used for calculating revenue per day, profit per day, and so on. Multi[ply by 365 to produce an annualised result. |