Accounting Ratio Calculator — Liquidity DSCR & ROCE
This free Accounting Ratio Calculator turns your balance sheet and profit & loss figures into the core financial ratios in one go — liquidity (current, quick), solvency (debt-to-equity, interest coverage), profitability (gross, net margin, ROE, ROA) and activity (inventory and asset turnover). Enter each figure once, switch between rupees, lakh or crore, and get every ratio with a plain-language reading of whether it looks strong, average or weak. All maths runs in your browser; nothing is stored.
Calculate Your Accounting Ratios
Fill in whatever you have — the tool computes every ratio it has enough inputs for and skips the rest.
How to Use This Accounting Ratio Calculator
- Pick your unit — enter figures in rupees, lakh or crore; the toggle scales everything for you.
- Enter balance sheet figures — current assets, current liabilities, inventory, total debt, shareholders' equity and total assets.
- Enter profit & loss figures — revenue, cost of goods sold, operating profit (EBIT), net profit, and interest expense.
- Add average inventory if you have it — otherwise the tool uses the closing inventory figure for turnover.
- Click Calculate Ratios — you instantly get liquidity, solvency, profitability and activity ratios, each with a short interpretation.
You don't need every field. The calculator computes each ratio for which it has the required inputs and quietly skips the others, so it works whether you have a full set of statements or just a few figures.
CA Tip: For ratios that use a balance like equity, inventory or assets, analysts often use the average of opening and closing values for a more accurate result. For a single-period snapshot, the closing figures used here are a reasonable approximation. For the full picture, try our financial ratios dashboard.
What Are Accounting Ratios?
An accounting ratio expresses the relationship between two figures drawn from the financial statements — for example, current assets compared with current liabilities. On their own, the numbers in a balance sheet or profit & loss account are hard to judge. Ratios convert them into standardised measures that can be tracked over time and compared against competitors and industry norms.
Ratio analysis is the backbone of financial statement analysis. A stakeholder deciding whether to invest, lend, supply or restructure operations relies on ratios to examine trends, set benchmarks, frame budget expectations and compare peers. They are equally central to audit procedures, where unexpected movements in key ratios flag areas needing deeper testing.
Who uses them
- Owners and management — to monitor performance and set targets.
- Banks and lenders — to set credit limits and loan covenants.
- Investors — to value a business and assess risk before funding.
- Auditors — to perform analytical review and spot anomalies.
The Four Categories of Accounting Ratios
Most accounting ratios fall into four families. This calculator covers the most widely used ratio in each group.
1. Liquidity Ratios
These measure short-term solvency — whether a business can meet obligations due within a year. The current ratio and the stricter quick (acid-test) ratio are the headline measures. A quick ratio above 1 suggests a firm can cover immediate liabilities without selling stock.
2. Solvency & Leverage Ratios
These assess long-term stability and reliance on borrowing. The debt-to-equity ratio compares borrowed funds with owners' funds, while the interest coverage ratio checks whether operating profit comfortably covers interest. Higher leverage means higher financial risk.
3. Profitability Ratios
These measure the ability to generate profit. Gross and net profit margins express profit as a percentage of sales, while return on equity and return on assets measure profit relative to the capital and assets deployed.
4. Activity / Turnover Ratios
These show how efficiently assets are used. Inventory turnover measures how fast stock is sold and replaced; asset turnover measures revenue generated per rupee of assets. Faster turnover usually means tighter working capital and stronger cash flow.
Accounting Ratio Formulas
Quick Ratio = (Current Assets − Inventory) ÷ Current Liabilities
Debt-to-Equity = Total Debt ÷ Shareholders' Equity
Interest Coverage = EBIT ÷ Interest Expense
Gross Margin % = (Revenue − COGS) ÷ Revenue × 100
Net Margin % = Net Profit ÷ Revenue × 100
Return on Equity % = Net Profit ÷ Equity × 100
Return on Assets % = Net Profit ÷ Total Assets × 100
Inventory Turnover = COGS ÷ Average Inventory
Asset Turnover = Revenue ÷ Total Assets
Worked Example
A company has current assets of ₹40 lakh, current liabilities ₹20 lakh, inventory ₹12 lakh, total debt ₹30 lakh, equity ₹50 lakh, revenue ₹100 lakh, COGS ₹60 lakh and net profit ₹10 lakh.
Quick Ratio = (40 − 12) ÷ 20 = 1.4
Debt-to-Equity = 30 ÷ 50 = 0.6
Net Margin = 10 ÷ 100 = 10%
Return on Equity = 10 ÷ 50 = 20%
These results point to a comfortably liquid, modestly leveraged and profitable business — but every figure should still be read against its own industry, as the interpretation section explains.
Need Help with Financial Statement Analysis?
Patron Accounting LLP supports businesses analysing liquidity, solvency, profitability and efficiency — for Pune, Mumbai, Delhi, Gurugram and pan-India clients.
How to Interpret Accounting Ratios
A ratio is only meaningful in context. The same figure can be healthy in one industry and alarming in another, so always benchmark against your own sector and your own past trend. The general guides below are starting points, not absolute rules.
| Ratio | Comfortable Range* | What a weak reading suggests |
|---|---|---|
| Current Ratio | 1.5 – 2.0 | Below 1: short-term liquidity strain |
| Quick Ratio | ≥ 1.0 | Below 1: reliant on selling stock to pay dues |
| Debt-to-Equity | ≤ 1 – 2 | High: heavy leverage, interest burden, risk |
| Interest Coverage | ≥ 2 – 3× | Below 1.5: profits barely cover interest |
| Net Profit Margin | Sector-specific | Falling: cost or pricing pressure |
| Return on Equity | Sector-specific | Low: weak returns on owners' funds |
*Indicative general ranges. Capital-intensive sectors, financial firms and early-stage startups can sit well outside these and still be healthy.
Note: Never judge a business on one ratio. Read several together and across years. A strong current ratio paired with falling margins and rising debt tells a very different story than the current ratio alone.
Accounting Ratios, Standards & Audit in India
For Indian businesses, ratios are not just an internal tool — they connect directly to statutory reporting and credit.
Accounting standards drive the inputs
The figures you feed into these ratios depend on how items are recognised and valued under the accounting standards issued by the ICAI. Consistent application is what makes ratios comparable year on year and against audited peers, which is why valuation policies matter as much as the arithmetic.
Mandatory ratio disclosures
Companies preparing accounts under the Schedule III format set out in the Companies Act, administered by the Ministry of Corporate Affairs, are required to disclose key ratios such as current ratio, debt-to-equity and return on equity in the notes, along with explanations for significant year-on-year changes. The statute itself is published on India Code.
Ratios in lending and tax
Banks use liquidity and leverage ratios to set working-capital limits under lending norms framed by the Reserve Bank of India, while large swings in profitability or turnover can attract scrutiny from the Income Tax Department during assessment. Clean, audit-ready books are what let you present ratios with confidence to any of these stakeholders.
Note: This tool gives estimates for analysis only. It is not accounting, tax or investment advice. Consult a qualified Chartered Accountant for ratio analysis and disclosures specific to your business.