Ratio analysis is an excellent method for determining the overall financial condition of your small business. It puts the information from a financial statement into perspective, helping to spot financial patterns that may threaten the health of your company.

Ratios are also very useful for making comparisons between your business and other businesses in your industry. For example, comparing ratios can indicate whether a business is holding too much inventory or collecting receivable too slowly. This comparison provides a window into ways in which your business can improve its operations.

This financial ratios tool can be used to calculate 11 key financial ratios for your small business. When using the tool, keep a copy of your company's balance sheet nearby so you have the correct figures to plug in.

Getting the Most Out of Ratios

If you are new to using financial ratios, review this article to learn ratio analysis basics and gain access to resources for finding ratio baselines.

The ratios

Click on the ratios below to learn more about them or to calculate them for your business.

Current Ratio
Quick Ratio
Inventory Turnover Ratio
Receivables Turnover Ratio
Average Collections Period
Payables Turnover Ratio
Inventory to Net Working Capital
Debt to Equity Ratio
Return on Assets (ROA) Ratio
Gross Profit Margin Ratio
Return on Sales Ratio

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The views and opinions contained herein are not necessarily those of American Express and are intended as a reference and for informational purposes only. Please contact your attorney, accountant or other business professional for advice specific to your business.