Balance sheet ratios

Balance sheet ratios compare the various line items on a balance sheet in order to infer the liquidity, efficiency, and financial structure of a business. The following list includes the most common ratios used to analyze the balance sheet:

Liquidity Ratios

  • Cash ratio. Compares a company's most liquid assets to its current liabilities. It is the most conservative of all liquidity ratios.

  • Current ratio. Compares all current assets to all current liabilities to see if there are enough current assets to pay for current liabilities. Its main failing is that the inventory component of current assets can be difficult to sell off.

  • Quick ratio. Compares all current assets except inventory to current liabilities to see if there are sufficient assets capable of being liquidated in the near future to pay for current obligations.

Efficiency Ratios

Financial Structure Ratios

Related Courses

Business Ratios Guidebook 
The Interpretation of Financial Statements