Ratio Analysis
Worksheets
Use these ratios to:
1) Compare historical trends for the
company over time
and
2) Compare the business with others
in the same industry
Source: Rocky Wade, University of Oklahoma Economic Development Institute
Financial Analysis Worksheets: Page 1 of 7
Income Statement Ratios
Used to analyze the control of costs
Note: Comparisons made to the Sales/Income figures
Ratio
Sales
Growth
Formula
This year’s Sales
Minus Last Year’s sales
Equals Sales difference
Definition
Analysis
The percentage
increase in sales
over the past year
Over time, sales growth
should be continuing, but
gradual, to avoid the fast
growth syndrome
The percentage of
each sales dollar
which is spent to
make the product or
service
Over time, COGS/Sales
should be stable or
declining and
consistent with or better
than the industry
The percentage of
each sales dollar
which remains after
all expenses to make
the product or
service
Over time, Gross
Profit/Sales should be
stable or increasing
and consistent with or
better than the industry
The percentage of
each sales dollar that
is spent to operate
the company, not
including COGS
Over time, Operating
Expenses/Sales should be
stable or increasing
and consistent with or
better than the industry
The percentage of
each sales dollar that
is profit
Over time, earnings /
Sales should be stable or
increasing and consistent
with or better than the
industry
Divided by
Last Year’s Sales
Multiplied by100
COGS
to
Sales
COGS
Divided by
Sales
Gross
Profit
to
Sales
Gross Profit
Divided by
Sales
Operating
Expenses
to
Sales
Operating Expenses
Divided by
Sales
Earnings
Before
Tax to
Sales
Earnings before Tax
Divided by
Sales
Financial Analysis Worksheets: Page 2 of 7
Worksheet: Calculating Income Statement Ratios
Year 1
Year 2
Year 3
Sales Growth: How much have the company’s sales grown?
This year’s Sales
- Last Year’s Sales
-=
/
= Sales Difference
/ Last Year’s Sales
-=
/
x 100
x 100
=
= % Sales Growth
x 100
%
=
%
COGS/Sales: Has the company been able to control its variable costs?
Cost of Goods Sold
/ Sales
/
= COGS as % of Sales
=
/
%
=
/
%
=
%
Gross Profit/Sales: Has the company maintained its gross profit margin?
Gross Profit
/ Sales
/
= GP as % of Sales
=
/
%
=
/
%
=
%
Operating Expenses/Sales: Has the company been able to control fixed & discretionary costs?
Operating Expenses
/ Sales
/
= OpEx as % of Sales
=
/
%
=
/
%
=
%
Earnings Before Tax/Sales: How much of each sales $ remains as profit before taxes are paid?
EBT
/ Sales
/
= EBT as % of Sales
=
/
%
=
/
%
=
%
Earnings After Tax/Sales: How much of each sales $ remains as profit after taxes are paid?
PAT
/ Sales
/
=PAT as % of Sales
=
/
%
=
/
%
=
%
Financial Analysis Worksheets: Page 3 of 7
Balance Sheet Ratios
Used to analyze the liquidity of the business
Ratio
Formula
Definition
Analysis
Current
Ratio
Current Assets
Divided by
Current Liabilities
Compares cash
available from
operations and cash
which must be paid
for operations
1:1 means the business can
generate $1 in cash for every $1 it
owes. Over time, it should be
stable or increasing and consistent
with or better than the industry
Quick
Ratio
Cash + Receivables
Divided by
Current Liabilities
Compares cash
which can be
collected quickly
and cash which must
be paid for operation
excluding inventory
1:1 means the business can
generate $1 in cash from only
cash and receivables for every $1
it owes. Over time, it should be
stable or increasing and consistent
with or better than the industry
Current Assets
Minus
Current Liabilities
Cash remaining after
all operating
(current) assets are
collected and all
operating (current)
liabilities are paid
Working capital should be
positive and increasing over time.
Negative WC means the business
must obtain additional funds
through equity investment or a
line of credit
Allows you to see
whether the
company is funded
by debt or equity,
therefore who is
financing the
company
In most situations, this should be
going down. Over time, it should
be stable or decreasing and
consistent with or better than the
industry
aka:
Acid Test
Working
Capital
Debt to
Equity
Ratio
aka:
Leverage
Ratio
Total Liabilities
Divided by
Net Worth
Financial Analysis Worksheets: Page 4 of 7
Worksheet: Calculating Balance Sheet Ratios
Year 1
Year 2
Year 3
Current Ratio: Can company generate current/operating cash to pay bills due in next 12 mo?
Current Assets
/ Current Liabilities
/
/
/
= Current Ratio
=
=
=
Quick Ratio: Can company generate enough cash & A/R to pay bills due in next 12 months?
CASH & Marketable
Securities
+ Receivables
+
+
+
= Quick Cash Available
=
/
=
/
=
/
=
=
=
/ Current Liabilities
= Quick Ratio
Working Capital: How much cash remains after the company pays its bills in next 12 mo?
Current Assets
-- Current Liabilities
--
--
--
= Working Capital
=
=
=
Debt/Equity Ratio: How has the company financed operations between debt & equity?
Total Liabilities
/ Net Worth
/
/
/
= Debt/Equity Ratio
=
=
=
Financial Analysis Worksheets: Page 5 of 7
Operating Cycle Ratios
Used to analyze the use of cash in business operations
Ratio
Formula
Days
Receivable
(D/R)
Receivables
Divided by
Sales
X 360
Average number of
days that the
business takes to
collect from its
customers
D/R of 30 means that the
business averages 30 days to
collect from customers. D/R
should be:
1. Consistent with terms
offered to customers
2. Stable or declining over time
3. Consistent with or better than
the industry
Inventory
Divided by
COGS
X 360
Average length of
time it takes the
business to make its
product, from
buying inventory, to
making the product,
until sale of the
product
D/I of 45 means that the business
has its cash tied up in inventory
for 45 days until the product is
sold. D/I should be:
1. Consistent with the
company’s projected
production cycle
2. Stable or declining over time
3. Consistent with or better than
the industry
Payables
Divided by
COGS
X 360
Average number of
days that the
business takes to pay
its suppliers
D/R of 30 means that the
business averages 30 days to pay
its suppliers. D/P should be:
1. Consistent with terms
offered by suppliers
2. Stable or declining over time
3. Consistent with industry
Days Receivable
+ Days Inventory
- Days Payable
Average number of
days that the
business has its cash
tied up in operations
Shorter O/C means a lesser need
for working capital. Longer O/C
means greater working capital
need for the company.
RMA:
Sales/
Receivables
Days
Inventory
(D/I)
RMA:
Cost of
Sales/
Inventory
Days
Payable
(D/P)
Definition
RMA:
Cost of
Sales/
Payables
Operating
Cycle
RMA:
Analysis
Does no total
Financial Analysis Worksheets: Page 6 of 7
Worksheet: Operating Cycle Ratios
Year 1
Year 2
Year 3
Days Receivable: How long, on average, does the company take to collect from customers?
Receivables
/ Sales
/
/
/
X 360 days in Period
X 360
X 360
X 360
= Days Receivable
=
=
=
Days Inventory: How long, on average, does the company have cash invested in the
inventory/manufacturing process?
Inventory
/ Cost of Goods Sold
/
/
/
X 360 days in Period
X 360
X 360
X 360
= Days Inventory
=
=
=
Days Payable: How long, on average, does the company take to pay its suppliers?
Payables
/ Cost of Goods Sold
/
/
/
X 360 days in Period
X 360
X 360
X 360
= Days Payable
=
=
=
Operating Cycle: How long, on average, does the company have its cash tied up in the
operations of the business?
+ Days Receivable
+
+
+
+ Days Inventory
+
+
+
-- Days Payable
--
--
--
= Operating Cycle
=
=
=
Financial Analysis Worksheets: Page 7 of 7