Financial Ratio Analysis
One set of figures, the whole ratio picture — profitability, liquidity, leverage and efficiency side by side.
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How it works
Individual ratios rarely mean much on their own. A high return on equity can come from genuine operating strength or from heavy borrowing, and only looking at leverage alongside it tells you which.
This calculates the standard set from a single set of inputs so the picture stays internally consistent. The table beneath groups them by what they measure, which is how an analyst reads them: profitability first, then liquidity, then leverage, then how hard the assets are working.
ROE = net profit ÷ equity · ROA = net profit ÷ assets · Asset turnover = revenue ÷ assets
- Profitability — net margin, return on equity, return on assets
- Liquidity — current and quick ratios
- Leverage — debt-to-equity, gearing
- Efficiency — asset turnover — revenue generated per unit of assets
Worked example
48,000,000 revenue, 5,900,000 net profit, 62,000,000 assets, 24,000,000 equity
Inputs
Results
ROE is more than double ROA, which means leverage is doing a lot of the work. That is fine while trading is good and painful when it is not.
Frequently asked questions
Which ratio matters most?
It depends on the question. Lenders look at liquidity and interest cover; investors at return on equity and margins; operators at asset turnover and working capital. No single ratio answers everything.
Why is return on equity so much higher than return on assets?
Leverage. Borrowing lets a business control more assets than the owners funded, which amplifies returns on the way up and losses on the way down. A wide gap between the two is a leverage signal.
What should I compare these against?
Your own figures from prior periods first — the trend is usually more informative than the level — and then direct competitors in the same sector. Cross-industry comparison is close to meaningless.
Is my data sent anywhere?
No. The calculation runs entirely in your browser. Nothing you type is transmitted to us or stored.
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