Calculate 14 essential profitability, liquidity, efficiency and gearing ratios from one set of financial-statement figures. The calculator shows the formula, result and a short interpretation prompt for every available ratio.
Your financial ratio results
Financial ratio formulas used
| Category | Ratio | Formula | What it helps assess |
|---|---|---|---|
| Profitability | Gross profit margin | (Revenue − cost of sales) ÷ revenue × 100 | Direct trading margin |
| Profitability | Operating profit margin | Operating profit ÷ revenue × 100 | Profitability after operating costs |
| Profitability | Net profit margin | Profit after tax ÷ revenue × 100 | Bottom-line profit from revenue |
| Profitability | ROCE | Operating profit ÷ average capital employed × 100 | Return generated from long-term finance |
| Profitability | ROE | Profit after tax ÷ average equity × 100 | Return attributable to equity |
| Liquidity | Current ratio | Current assets ÷ current liabilities | Short-term asset coverage |
| Liquidity | Quick ratio | (Current assets − inventory) ÷ current liabilities | Short-term coverage excluding inventory |
| Efficiency | Inventory days | Average inventory ÷ cost of sales × days | Approximate inventory holding period |
| Efficiency | Receivables days | Average receivables ÷ credit sales × days | Approximate collection period |
| Efficiency | Payables days | Average payables ÷ credit purchases × days | Approximate supplier payment period |
| Efficiency | Asset turnover | Revenue ÷ average total assets | Revenue generated per unit of assets |
| Gearing | Debt-to-equity | Interest-bearing debt ÷ equity × 100 | Debt relative to equity financing |
| Gearing | Debt-to-capital | Debt ÷ (debt + equity) × 100 | Debt share of permanent capital |
| Gearing | Interest cover | Operating profit ÷ finance cost | Operating profit available per unit of interest |
How to use the calculator correctly
- Select one consistent period. Do not mix revenue from one year with assets or liabilities from another.
- Keep units consistent. You can use dollars, rupees or thousands because the ratios cancel the unit, but every amount must use the same unit.
- Use averages where possible. For inventory, receivables, assets, equity and capital employed, calculate (opening balance + closing balance) ÷ 2. A closing balance can distort a ratio when the business is seasonal or has changed rapidly.
- Use credit figures for working-capital days. Receivables days should use credit sales. Payables days should use credit purchases. Approximations should be disclosed when the exact split is unavailable.
- Compare rather than judge in isolation. Review the same company across several periods and compare it with a genuinely similar peer or industry benchmark.
Financial ratio worked examples
The table below applies the calculator’s worked-example inputs to all 14 formulas. Use it to see how each result is calculated and how to begin interpreting it.
| Ratio | Worked calculation | Result and interpretation |
|---|---|---|
| Gross profit margin | (2,400 − 1,560) ÷ 2,400 × 100 | 35.00%. The business retains 35 cents of gross profit from each unit of revenue before operating expenses. |
| Operating profit margin | 360 ÷ 2,400 × 100 | 15.00%. Operating profit equals 15% of revenue after cost of sales and operating expenses. |
| Net profit margin | 216 ÷ 2,400 × 100 | 9.00%. Nine cents of after-tax profit remain from each unit of revenue. |
| Return on capital employed | 360 ÷ 1,500 × 100 | 24.00%. Operating profit represents a 24% accounting return on long-term capital employed. |
| Return on equity | 216 ÷ 900 × 100 | 24.00%. After-tax profit equals 24% of average equity; compare this with prior years and similar businesses. |
| Current ratio | 720 ÷ 400 | 1.80 times. Current assets are 1.8 times current liabilities, although asset quality and timing still matter. |
| Quick ratio | (720 − 240) ÷ 400 | 1.20 times. Liquid current assets excluding inventory are 1.2 times current liabilities. |
| Inventory days | 220 ÷ 1,560 × 365 | 51.5 days. Inventory is held for about 52 days on average before being sold or used. |
| Receivables days | 300 ÷ 2,100 × 365 | 52.1 days. Customers take about 52 days to pay on average; compare this with stated credit terms. |
| Payables days | 250 ÷ 1,500 × 365 | 60.8 days. Suppliers are paid after about 61 days on average; consider agreed terms and supplier relationships. |
| Asset turnover | 2,400 ÷ 1,800 | 1.33 times. Each unit invested in average assets generates about 1.33 units of revenue. |
| Debt-to-equity | 600 ÷ 900 × 100 | 66.67%. Interest-bearing debt equals roughly two-thirds of equity under the chosen debt definition. |
| Debt-to-capital | 600 ÷ (600 + 900) × 100 | 40.00%. Debt supplies 40% of total debt-plus-equity capital. |
| Interest cover | 360 ÷ 60 | 6.00 times. Operating profit covers finance cost six times; trend and cash-flow resilience should also be assessed. |
Example inputs and overall conclusion
The “Load worked example” button uses revenue of 2,400, cost of sales of 1,560, operating profit of 360 and profit after tax of 216. Current assets are 720, inventory is 240 and current liabilities are 400. Average capital employed is 1,500, average equity is 900, debt is 600 and finance cost is 60.
The calculator returns a gross margin of 35%, an operating margin of 15%, ROCE of 24%, a current ratio of 1.80:1, a quick ratio of 1.20:1, debt-to-equity of 66.67% and interest cover of 6 times. These results are starting points for analysis—not automatic “good” or “bad” verdicts. A strong interpretation explains the business model, changes over time and any accounting or seasonal factors affecting the inputs.
How to interpret the four ratio groups
Profitability
Margins connect profit to revenue, while ROCE and ROE connect profit to invested capital. A change in a return ratio may come from prices, sales mix, cost control, asset use, financing or one-off items. Examine both the numerator and denominator before drawing a conclusion.
Liquidity
The current and quick ratios indicate short-term coverage at a point in time. There is no universal ideal for every industry. Cash-conversion speed, access to finance, overdue balances, seasonality and the quality of inventory and receivables all matter.
Efficiency
Inventory, receivables and payables days approximate the working-capital cycle. Shorter is not always better: insufficient inventory can disrupt sales, very strict credit can lose customers and slow supplier payments can damage relationships. Interpret the three measures together.
Gearing
Debt-to-equity and debt-to-capital describe financing structure; interest cover connects operating profit to finance cost. Debt definitions differ, so state whether you include lease liabilities, overdrafts and other interest-bearing obligations. Read our capital gearing ratio guide for a deeper explanation.
Related guides
- Accounting ratio analysis: formulas, examples and interpretation
- Current ratio: formula, interpretation and worked examples
- Quick ratio: formula, interpretation and limitations
Authoritative learning sources
The ratio categories, formulas and interpretation approach used here are aligned with ACCA learning guidance. See ACCA’s ratio analysis guide and financial statements interpretation guide.
Frequently asked questions
Does the calculator store my figures?
No. Calculations run locally in your browser. The page records an anonymous tool-use event without sending the values you entered.
Can I use any currency?
Yes. Ratios are unit-independent when every input uses the same currency and scale.
Why are some results shown as “Not available”?
A required input is blank or the denominator is zero. The formula shown on the result card identifies the fields needed.
Should I use opening, closing or average balances?
Use average balances when possible, especially for inventory, receivables, assets, equity and capital employed. If only closing data is available, state that limitation.
Is a high ratio always better?
No. Meaning depends on the ratio, industry, period, strategy and data quality. Compare trends and investigate the underlying causes.
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