Business financial ratios cheat sheet

How to use this cheat sheet

You don't need fifty ratios to run a company well — you need a handful, tracked over time. A single ratio in isolation means little; the value is in the trend (is it improving?) and the comparison (how do you sit against your sector?). Pull the figures from your latest management accounts and recalculate monthly or quarterly.

The benchmarks below are broad, illustrative rules of thumb typical of the market, not targets for any specific business. A capital-light services firm and a stock-heavy wholesaler will sit in very different places and both be healthy. Read your numbers in your own context.

Liquidity — can you pay your bills?

Ratio	Formula	Rough guide
Current ratio	Current assets ÷ current liabilities	Around 1.5–2.0 is comfortable
Quick ratio	(Current assets − stock) ÷ current liabilities	Around 1.0+ means you can pay without selling stock

These answer the most basic survival question: can the business meet its short-term obligations? A current ratio below 1 means short-term liabilities exceed short-term assets — a cash squeeze is likely. The quick ratio strips out stock, which you can't always sell fast, giving a harsher and often more honest read for stock-heavy businesses.

Profitability — are you actually making money?

Ratio	Formula	What it shows
Gross margin	Gross profit ÷ revenue × 100	Profit after direct costs — your pricing power
Net margin	Net profit ÷ revenue × 100	Profit after everything — the bottom line
Return on capital	Operating profit ÷ capital employed × 100	How hard your invested money works

Gross margin tells you whether your pricing and direct costs work; a falling gross margin is an early warning that costs are creeping or discounting is biting. Net margin shows what survives after overheads. Track both — a healthy gross margin with a thin net margin points squarely at overheads.

Gearing and efficiency — structure and speed

Ratio	Formula	Rough guide
Gearing	Debt ÷ equity × 100	Lower = less risk; sector-dependent
Interest cover	Operating profit ÷ interest cost	Comfortably above 2–3× to absorb shocks
Debtor days	(Debtors ÷ revenue) × 365	Lower than your payment terms
Stock days	(Stock ÷ cost of sales) × 365	As low as service levels allow

Gearing and interest cover tell a lender — and you — whether the business can comfortably carry its borrowing. Debtor and stock days drive your working capital: shortening either releases cash directly.

Turn ratios into decisions

Ratios earn their keep when they change what you do. Falling gross margin → review pricing and supplier costs. Rising debtor days → tighten credit control. Thin interest cover → think hard before adding borrowing. Build them into a one-page KPI dashboard you review every month so the trend is always in front of you.

Lenders read the same ratios when you apply for finance — strong interest cover and sensible gearing make for a quick, clean decision. If your ratios show a healthy business with a temporary working-capital gap, a short-term facility such as a Credicorp business loan can bridge it, lent to the company with no personal guarantee. This is educational, not financial advice.