Common Financial Ratios for Year End Reviews

Use financial ratios to compare year to year performance. Ratios will indicate a trend of better or worse than last year. Calculating these ratios will require a Balance Sheet and a Profit and Loss statement


BALANCE SHEET RATIOS (Liquidity)

• Current Ratio (Solvency) divide Current Assets by Current Liabilities to measure dollars of assets per dollar of debt shows ability to pay debts.
• Quick Ratio (Liquidity) divide  Cash plus Accounts Receivable by Current Liabilities to measure CASH available to pay debts show ability to quickly pay debts.
• Debt-to Worth (Safety) divide Total Liabilities by Net Worth to measure Dollars of Liabilities per dollar of net worth
• Working Capital divide Current Assets minus Current Liabilities by Sales to measure ability to pay short term debt
• Cash divide Cash plus equivalents by Total Assets to measure CASH as a percent of total assets

INCOME STATEMENT RATIOS (Profitability)