Financial ratio calculator
Eight figures from your balance sheet and profit and loss produce the seven ratios a lender, an investor or an accountant will look at first. Each one says what it measures and what the conventional band is, because a number without a reading is just arithmetic.
Equity
$500,000
Total assets less total liabilities, which is what the owners would be left with. Every return figure below is measured against it.
Current ratio
2.00x
Current assets / current liabilities
Healthy
Whether short-term assets cover the debts falling due within a year. Below 1 means they do not. Much above 3 can mean cash is sitting idle rather than working.
Quick ratio
1.33x
(Current assets − inventory) / current liabilities
Healthy
The same test without inventory, which is the asset that is hardest to turn into cash quickly. A business can pass the current ratio and fail this one.
Debt to equity
0.80x
Total liabilities / equity
Healthy
How much of the business is funded by lenders rather than owners. Lenders read this before almost anything else. A negative figure means liabilities exceed assets.
Gross margin
40.0%
(Revenue − cost of goods sold) / revenue
Healthy
What is left of each dollar of sales after the direct cost of delivering it, before overheads. It is the ceiling on every other margin.
Net margin
8.0%
Net income / revenue
Watch
What is left of each dollar of sales after everything, including tax and interest.
Return on assets
8.9%
Net income / total assets
Healthy
How hard the assets are working. Comparable only within an industry: a haulier and a consultancy are not on the same scale.
Return on equity
16.0%
Net income / equity
Healthy
The return on what the owners actually have in the business. Borrowing flatters it, which is why it is read next to debt to equity, never alone.
The health labels are conventional rules of thumb, not a verdict. Ratios only mean something against the same industry and the same business a year ago: a supermarket and a software firm are both healthy at current ratios that look nothing like each other.
Four questions, seven ratios
Every ratio here answers one of four questions. Can it pay its bills? is the current and quick ratio. Who owns it, the owners or the lenders? is debt to equity. Does it make money on what it sells? is gross and net margin. Is the money in the business working? is return on assets and return on equity.
They are most useful in pairs. A strong current ratio with a weak quick ratio means the money is tied up in stock. A strong return on equity with a high debt to equity means the returns are borrowed rather than earned. A healthy gross margin with a thin net margin means the product works and the overheads do not. One ratio on its own has misled more people than it has helped.
Frequently asked questions
What is a good current ratio?
Conventionally between 1.5 and 3. Below 1 means the debts falling due within a year exceed the assets available to meet them, which is a warning even in a profitable business. Far above 3 is not automatically good either: it can mean cash and stock are sitting idle instead of being put to work. The number only means something next to the same business a year ago and the same industry today.
What is the difference between the current ratio and the quick ratio?
Inventory. The quick ratio strips it out, because stock is the current asset that is hardest to turn into cash in a hurry, and in a bad month it is worth less than the balance sheet says. A business can pass the current ratio and fail the quick ratio, and that gap is usually the most interesting thing on the page.
What does debt to equity actually tell a lender?
How much of the business is funded by lenders rather than owners, and therefore how much cushion exists before a loss reaches the lender. It is one of the first things read on a credit application. A negative figure means liabilities exceed assets, so the owners' stake has already been wiped out.
Why is return on equity higher than return on assets?
Because borrowing flatters it. Return on assets measures profit against everything the business uses; return on equity measures it against only the owners' share. The more of the business is funded by debt, the smaller that denominator is and the better the return looks. That is exactly why the two are read together, and never return on equity alone.
Can I compare these ratios across industries?
No, and it is the most common mistake made with them. A supermarket runs on thin margins and fast stock turnover; a software firm has almost no cost of goods and enormous gross margin. Both can be healthy at ratios that look nothing like each other. Compare a business with its own history and with direct competitors.
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Hadi · Developer and maintainer
Federal tables checked against the IRS 2026 inflation adjustments on . State figures, where quoted, are each state's latest published schedule, 2025; federal figures are 2026.