Financial Ratios Calculator

Financial Ratios are quantitative metrics derived from financial statements. They help in analyzing a company's performance, financial health, and operational efficiency by comparing different financial aspects.

Financial ratios provide insights into a company's liquidity, profitability, solvency, and efficiency. They are essential for investors, creditors, and management to make informed decisions regarding investment opportunities, lending, and strategic planning.

Financial ratios are calculated using data from financial statements like the balance sheet, income statement, and cash flow statement. Each ratio has its own formula, typically involving division or multiplication of specific financial metrics.

Financial ratios are generally categorized into four types:

• Liquidity Ratios: Measure a company's ability to meet short-term obligations.
• Profitability Ratios: Assess a company's ability to generate earnings.
• Solvency Ratios: Evaluate a company's long-term financial stability.
• Efficiency Ratios: Indicate how well a company utilizes its assets.

Yes, financial ratios can be applied to personal finances to assess liquidity, debt levels, savings efficiency, and overall financial health. Examples include debt-to-income ratio and savings rate.

It's advisable to review financial ratios at least quarterly or annually, especially when making significant business or personal financial decisions. Regular monitoring helps in tracking progress and identifying areas needing improvement.

Absolutely. Comparing your financial ratios with industry benchmarks helps in understanding your competitive position, identifying strengths, and recognizing areas for improvement. It provides context to your financial performance.

The Debt-to-Equity (D/E) Ratio compares a company's total debt to its shareholders' equity. It shows how much of the business is financed through debt versus owner's funds.

🔹 Formula:

Debt-to-Equity Ratio = Total Liabilities ÷ Shareholders' Equity

A high D/E ratio means a company is heavily reliant on borrowing, which increases financial risk, while a low D/E ratio suggests financial stability.

Profitability ratios measure how well a company generates profits relative to revenue, assets, or equity. The three most common profitability ratios are:

• Gross Profit Margin = (Revenue - Cost of Goods Sold) ÷ Revenue
• Operating Profit Margin = Operating Income ÷ Revenue
• Net Profit Margin = Net Income ÷ Revenue

A higher profit margin indicates better financial health, while a low margin may signal inefficiencies or high expenses.

Liquidity ratios assess a company's ability to meet short-term obligations using its current assets. The two most common liquidity ratios are:

🔹 Key Liquidity Ratios:

• Current Ratio = Current Assets ÷ Current Liabilities
• Quick Ratio = (Current Assets - Inventory) ÷ Current Liabilities

A higher liquidity ratio means a company is in a better position to pay off short-term debts, reducing financial risk.

Comparing financial ratios across companies helps investors and analysts assess relative performance and identify strong or weak businesses in an industry.

🔹 Steps for Effective Comparison:

• Compare companies within the same industry.
• Use industry benchmarks as a reference point.
• Analyze trends over multiple years.
• Combine multiple financial ratios for a complete assessment.

Our Financial Ratios Calculator allows you to enter multiple company values and compare them side by side for a more detailed analysis.

Return on Investment (ROI) measures how profitable an investment is relative to its cost. It’s used to evaluate business investments, stocks, or even personal financial decisions.

🔹 Formula:

ROI = (Net Profit ÷ Investment Cost) × 100

🔹 Example:

If you invest $1,000 in a stock and later sell it for $1,500, your ROI would be:

• Net Profit: $1,500 - $1,000 = $500
• ROI: (500 ÷ 1,000) × 100 = 50%

A higher ROI indicates a better investment return, but risks should also be considered.