Free Tool
Financial Ratio Calculator
Enter a company’s income statement and balance sheet figures — from any annual report, in any currency — and get the core investor ratio toolkit: liquidity, profitability, leverage, and efficiency, each with a plain-English reading of what the number suggests.
Income Statement (most recent year)
Balance Sheet (same date)
Gross profit
$400,000
Operating profit
$40,000
Working capital
$50,000
Liquidity
Current ratio
Positive but thin cushion — slow collections or a bad quarter could pinch.
Quick ratio
Coverage leans on selling inventory — check how fast stock actually moves.
Profitability
Gross margin
Compare against the company’s own history and its industry — the trend matters more than the level.
Net margin
How much of each unit of sales survives to the bottom line.
Return on equity
Always read next to leverage: debt can manufacture a high ROE on a dangerously thin equity base.
Leverage
Debt-to-equity
Heavily leveraged — small setbacks become large shareholder losses.
Interest coverage
One rough patch puts the company in its lenders’ hands.
Efficiency
Receivable days
Collections are slow — profit is parked in unpaid invoices.
Inventory turnover
Stock moves quickly.
The Comfortable / Watch / Dig deeper bands are broad, industry-agnostic reference points — capital-heavy and inventory-light businesses live at very different normal levels. Ratios are conversation starters, not verdicts: always compare against the company’s own history and its industry.
How to Use It
- 1. Open the company’s statements — the annual report of any listed company, or the statements a private company provides in due diligence.
- 2. Enter the income statement figures — revenue, cost of sales, operating expenses, interest, and net income for the most recent year.
- 3. Enter the balance sheet figures — from the same date. The currency doesn’t matter as long as it is consistent.
- 4. Read the signals — each ratio gets a broad Comfortable / Watch / Dig deeper band and a one-line interpretation.
The Formulas
- Current ratio = current assets ÷ current liabilities
- Quick ratio = (cash + receivables) ÷ current liabilities
- Gross margin = (revenue − cost of sales) ÷ revenue
- Net margin = net income ÷ revenue
- Return on equity = net income ÷ equity
- Debt-to-equity = total liabilities ÷ equity
- Interest coverage = operating profit ÷ interest expense
- Receivable days = receivables ÷ revenue × 365
- Inventory turnover = cost of sales ÷ inventory
New to reading financial statements? This calculator pairs with the free Financial Statement Analysis for Investors course — see Ratio Analysis for Investors for what each family of ratios signals, Reading the Balance Sheet for the working-capital trapdoor, and Testing Management’s Story for stress-testing thin cushions.
Frequently Asked Questions
What are the most important financial ratios for investors?
A focused toolkit covers most situations: current and quick ratios for liquidity, gross margin, net margin and return on equity for profitability, debt-to-equity and interest coverage for leverage, and receivable days and inventory turnover for efficiency. Valuation multiples such as P/E and EV/EBITDA then tell you what the market is asking you to pay. No single ratio is a verdict — they are signals that tell you where to dig.
What is a good current ratio?
A current ratio above roughly 1.5 suggests a comfortable short-term cushion, while a ratio below 1.0 means current liabilities exceed current assets — a liquidity warning. But normal levels vary enormously by industry: supermarkets run happily below 1.0 because they sell inventory for cash before supplier bills fall due, while manufacturers usually need more. Always compare against the company’s own history and its industry.
What does debt-to-equity tell an equity investor?
Debt-to-equity measures how much of the business is financed by other people’s money. Because lenders rank ahead of shareholders, a highly leveraged balance sheet means the equity absorbs losses first — a 15% fall in asset values can wipe out the shareholders of a 4:1 leveraged company while barely denting a conservatively financed one. High leverage also amplifies return on equity in good years, which is why ROE should always be read alongside it.
Why do receivable days and inventory turnover matter?
They measure how quickly the company turns sales into actual cash. When receivable days stretch or inventory turnover slows while sales grow, working capital is consuming cash — profit is being parked in unpaid invoices and unsold stock. That pattern is one of the most reliable early warning signs that a growing, profitable-looking company is quietly running out of money.
Educational tool only. The interpretation bands are broad, industry-agnostic reference points; normal levels differ substantially by industry, business model, and jurisdictional accounting standards. Inventory turnover uses closing inventory as a proxy for the average. Nothing here is financial advice.