Comprehensive Ratio Analysis
Ratios transform raw financial numbers into actionable insights. In large corporations, they help boards and executives assess operational efficiency, liquidity, solvency, and profitability at a glance.
“Ratios turn billions into clarity, helping leaders make precise decisions.”
— Viswa
— Viswa
1. Liquidity Ratios
Measure short-term financial health and ability to cover obligations.
| Ratio | Formula | Value | Interpretation |
|---|---|---|---|
| Current Ratio | Current Assets / Current Liabilities | 2.0 | Strong liquidity; can easily cover short-term obligations. |
| Quick Ratio (Acid-Test) | (Current Assets - Inventory) / Current Liabilities | 1.5 | Healthy immediate liquidity, even excluding inventory. |
2. Profitability Ratios
Evaluate efficiency in generating profit from revenues and investments.
| Ratio | Formula | Value | Interpretation |
|---|---|---|---|
| Gross Margin | (Revenue - COGS) / Revenue | 33% | Shows efficient production and pricing strategy. |
| Operating Margin | Operating Income / Revenue | 21% | Strong operational control over expenses. |
| Net Margin | Net Income / Revenue | 15% | Healthy overall profitability for enterprise scale. |
| Return on Assets (ROA) | Net Income / Total Assets | 23% | Efficient asset utilization across multi-billion-dollar assets. |
| Return on Equity (ROE) | Net Income / Equity | 46% | High return to shareholders, strong value creation. |
3. Solvency & Leverage Ratios
Assess long-term financial stability and debt management.
| Ratio | Formula | Value | Interpretation |
|---|---|---|---|
| Debt-to-Equity | Total Debt / Equity | 1.0 | Balanced leverage; sustainable growth financing. |
| Interest Coverage | EBIT / Interest Expense | 10.6x | Can comfortably service debt from earnings. |
4. Efficiency Ratios
Indicate how effectively assets and resources are being used.
| Ratio | Formula | Value | Interpretation |
|---|---|---|---|
| Inventory Turnover | COGS / Inventory | 11.5x | Efficient inventory management; low holding costs. |
| Accounts Receivable Turnover | Revenue / Accounts Receivable | 8.8x | Receivables collected quickly; strong cash conversion. |
| Asset Turnover | Revenue / Total Assets | 1.54x | Good utilization of assets to generate revenue. |
“Ratios are not just numbers — they are strategic levers in corporate decision-making.”
— Viswa
— Viswa