Business Financial Ratios


Forming a clear financial picture of your business is important. Use these financial ratio calculators to determine your operation’s liquidity, solvency, profitability and coverage.

Current Ratio

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Result

Current Ratio 0.00

A current ratio above 1.5 is ideal because it shows current assets are greater than current liabilities. But be mindful that a ratio which is too high can also suggest you aren't putting your money to work.

Interpreting ratio numbers

The current ratio measures a business's ability to meet financial obligations as they come due, without disrupting normal operations.

There are no hard-and-fast rules about current ratios, but the financial literature suggests a ratio higher than 1.5 is healthy. If an operation’s current ratio is too high, it may not be using cash as efficiently as possible. A current ratio of 1.0 to 1.5 indicates a business is technically liquid, but it could be exposed to financial challenges if market conditions worsen.

A current ratio less than 1.0 means that a business lacks the current assets to cover short-term liabilities. If working capital is the first line of defence, its absence can force an operation into secondary means of repayment (refinancing of debt) or possibly even selling assets.

Debt-to-Equity Ratio

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Result

Debt-to-Equity Ratio 0.00

Generally, a debt-to-equity ratio below 1.0 would be seen as relatively safe, whereas ratios of 2.0 or higher would be considered risky.

Interpreting ratio numbers

The debt-to-equity ratio is a measure of the degree to which a company is financing its operations through debt versus wholly owned funds. More specifically, it reflects the ability of shareholder equity to cover all outstanding debts in the event of a business downturn.

Gross Margin Ratio

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Gross Margin Ratio 0.00

As a manufacturer, the higher the gross margin, the greater your company's efficiency in turning raw materials into income.

Interpreting ratio numbers

Gross profit margin is a metric to assess a company's financial health by calculating the amount of money left over from product sales after subtracting the cost of goods sold (COGS). Sometimes referred to as the gross margin ratio, gross profit margin is frequently expressed as a percentage of sales.

Debt Service Coverage Ratio

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Result

Debt Service Coverage Ratio 0.00

A DSCR of less than 1 means negative cash flow, which means that the borrower is unable to cover or pay current debt obligations without drawing on outside sources.

Interpreting ratio numbers

The debt-service coverage ratio (DSCR) measures a businesses available cash flow to pay current debt obligations. The DSCR shows whether a company has enough income to pay its debts.