Analysis & valuation
Four ratios lenders look at, calculated from your statements
A financial ratios calculator: owners enter current assets and liabilities, debt, equity, revenue and net income to see current ratio, debt-to-equity, net margin and return on equity.
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Which financial ratios matter most for a small business?
Four cover the basics: the current ratio (current assets ÷ current liabilities) for liquidity, debt-to-equity for leverage, net profit margin (net income ÷ revenue) for profitability, and return on equity (net income ÷ equity) for owner returns. Lenders read them together and against industry benchmarks.
Before a bank meeting or loan renewal
Loan applications, line-of-credit renewals and covenant checks send owners looking for their ratios. They want to see how they look to a lender before the meeting.
What the client types into a search box
“what ratios do banks look at for a business loan”
How a client works through it
Enter balance sheet items
Current assets, current liabilities, total debt and equity.
Enter income items
Annual revenue and net income.
Review the ratios
Current ratio, debt-to-equity, net margin and ROE.
Send for review
Owners can ask the firm to interpret them.
What lands in your inbox
When a client asks your firm to review the result, the request arrives as a contact record with their inputs and results attached, by email and, on paid plans, by webhook to your CRM.
Received
The six inputs give a quick read of liquidity, leverage and profitability. A low current ratio or high leverage suggests financing or cash management work; strong ratios suggest growth or tax planning.
What each ratio says
Current Ratio above 1 means current assets cover short-term obligations. Debt-to-Equity shows leverage. Net Profit Margin shows how much of revenue becomes profit. Return on Equity shows the return on the owners' stake.
Healthy ranges vary by industry; read them together, not one at a time.
Results shown: Current Ratio · Debt-to-Equity · Net Profit Margin · Return on Equity.
Why ratio analysis builds advisory relationships
Ratios translate the balance sheet and income statement into a story the owner can act on, and lenders use them for covenants. Firms that track them monthly become indispensable.
Bookkeepers can add ratio commentary to monthly reports; fractional CFOs use them in board packs.
Follow-ups this request opens
- Track ratios monthly with commentary
- Prepare for lender meetings and covenant tests
- Improve working capital and cash conversion
- Benchmark against the industry
What this calculator leaves out
- Simplified ratios from a few inputs.
- No industry benchmarks.
- Single period.
- Inputs must reconcile to statements.
Platform disclaimer shown under the calculator: Estimates only. Ratios are simplified and should be read alongside the full financial statements and industry benchmarks.
Compliance note for firms
Ratios presented to lenders should come from reliable financial statements. CPA firms associating their name with such information should follow applicable professional standards.
Not legal advice. See our disclaimer and the guide to compliance for client calculators.
Terms your client sees in the calculator
These definitions appear in the calculator's collapsible Definitions block, so clients don't have to call to ask what a label means.
- Current ratio
- Current assets divided by current liabilities, a basic measure of liquidity. A ratio of 2.0 means the business holds $2 of short-term assets for each $1 due within a year. Below 1.0 suggests it could struggle to meet near-term obligations; what counts as healthy varies by industry.
- Debt-to-equity ratio
- Total debt divided by total equity, a measure of leverage. It shows how much of the business is financed by lenders compared with owners. A higher ratio means more fixed obligations and more risk if earnings fall; capital-intensive industries typically run higher ratios than service businesses.
- Net profit margin
- Net income divided by revenue, expressed as a percentage. It shows how many cents of each sales dollar remain as profit after all expenses, interest and taxes. Margins differ widely by industry, so the figure is most useful compared with prior years or with similar businesses.
- Return on equity (ROE)
- Net income divided by total equity, expressed as a percentage. It measures how much profit the business generates on the owners’ investment. Leverage can raise ROE, because more debt means less equity for the same profit, so it is best read alongside the debt-to-equity ratio.
- Current assets
- Assets expected to be converted to cash or used up within a year: cash, accounts receivable, inventory and prepaid expenses. They are the numerator of the current ratio. Inventory can be slower to turn into cash than receivables, which is one reason the current ratio is a rough measure.
- Current liabilities
- Obligations due within a year, such as accounts payable, accrued wages, taxes owed and the current portion of long-term debt. They are the denominator of the current ratio. A rise in current liabilities without a matching rise in current assets weakens liquidity.
In our glossary: Current ratio · Working capital
Financial Ratios calculator: questions from firms and clients
What's a good current ratio?
Often between 1.2 and 2, but it depends on the industry.
Is high debt-to-equity bad?
Not always; it means more risk and lender scrutiny.
Why is ROE useful?
It shows the return on the owners' investment.
Do banks use these ratios?
Yes, often in covenants.
Where do I find the inputs?
From the balance sheet and income statement.
Can I compare with competitors?
With industry benchmark data, which the firm can provide.
How often should I check?
Monthly or quarterly.
Which plan includes it?
Network. See pricing.
No question matches that filter. Clear it to see them all, search the whole site, or ask us directly; we reply within one business day.
Clients who ask this usually ask next
Working Capital
how much working capital does my business need
Profit Margin
what is a good profit margin for my business
Business Loan
how much will my business loan payment be
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