Financial Ratios Analysis
Calculate the core liquidity, gearing and profitability ratios from your balance sheet and profit and loss account — current ratio, quick ratio, margins, ROE, ROA and asset turnover.
Data verified · July 2026
What is a healthy current ratio?
A ratio around 1.5-2.0 is often considered healthy, though the right level varies by sector — businesses with fast inventory turnover (retail) can operate safely with a lower ratio than manufacturers.
Source: ACCA Financial Management (FM) and Financial Reporting (FR) syllabuses, ratio analysis; CIMA — Financial ratio analysis topic guide. · updated 2026
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Everything about Financial Ratios Analysis
📋Overview+
Pulls together the standard ratio toolkit used to assess a company's health: liquidity ratios (current ratio, quick ratio) test whether short-term liabilities are covered by short-term assets; gearing and debt-to-equity test how reliant the company is on debt; and profitability ratios (gross, operating and net margin, return on equity and assets) show how efficiently the business converts revenue and capital into profit.
💡 Best practices
- A current ratio well above 2 isn't automatically good — it can mean cash or inventory is tied up unproductively rather than reinvested.
- Compare margins across at least 2-3 years, not a single period — a one-off gain or cost can distort a single year's ratio.
- Return on equity can look strong purely because of high gearing (leverage) — always check it alongside the gearing ratio, not in isolation.
🔢 Concrete example
£200,000 current assets, £50,000 inventory, £100,000 current liabilities: current ratio of 2.0 and quick ratio of 1.5, both comfortably above the conventional 1.0 threshold.
📖User guide+
How to use this calculator
- 1
Enter current assets, inventory and current liabilities for the liquidity ratios.
- 2
Enter total debt, total equity and total assets for gearing and return ratios.
- 3
Enter revenue, gross profit, operating profit and net profit for the margin ratios.
- 4
Review each ratio against your sector's typical range — a single ratio in isolation rarely tells the whole story.
📚Glossary+
- Quick ratio (acid test)
- Current assets minus inventory, divided by current liabilities — a stricter liquidity test than the current ratio because inventory can be slow or difficult to convert to cash.
- Gearing ratio
- Total debt divided by total equity (or total debt plus equity, depending on convention) — a measure of how much of the company's financing comes from debt versus shareholders.
ℹ️Sources & updates+
Last data update
July 7, 2026
Sources and references
ACCA Financial Management (FM) and Financial Reporting (FR) syllabuses, ratio analysis; CIMA — Financial ratio analysis topic guide.
The data in this calculator is updated regularly to reflect the latest official rates. When in doubt, consult the official sources listed above.
FAQ — Financial Ratios Analysis
What is a healthy current ratio?+
A ratio around 1.5-2.0 is often considered healthy, though the right level varies by sector — businesses with fast inventory turnover (retail) can operate safely with a lower ratio than manufacturers.
Why calculate both ROE and ROA?+
Return on equity shows the return to shareholders specifically, while return on assets shows how efficiently all capital (debt and equity) generates profit — a gap between the two usually reflects the effect of leverage.