Financial ratios from your trial balance

What does this tool calculate?

You upload a trial balance (Excel, CSV or PDF) and the tool reads it with the same reader the financial statements tool uses, classifies its accounts, then calculates 20 financial ratios in four groups: liquidity, profitability, activity (turnover and days) and leverage. Each ratio shows its value, its formula with the numbers from your trial balance, a sentence explaining what it means, and its name links to its explanation in the accountant's glossary.

You can optionally upload the previous year's trial balance, so the turnover and return ratios are calculated from the average of the two balances and a comparison between the two years appears. The file is read inside your browser and is not uploaded to any server.

How to use it

1. Export the trial balance from your system with closing balances (the account name and the debit and credit balance are enough).
2. Upload it in the “Current year trial balance” box.
3. If you want averages and a comparison, upload the previous year's trial balance in the second box.
4. Review the account classification table if a ratio looks odd: a ratio is only as correct as the classification.
5. Download the PDF report, or an Excel file with a “Calculation steps” sheet containing the trial balance totals and the formula for each ratio.

Liquidity ratios: can you pay your short-term obligations?

• Current ratio = current assets ÷ current liabilities.
• Quick ratio = (current assets − inventory) ÷ current liabilities.
• Cash ratio = cash and cash equivalents ÷ current liabilities.
• Working capital = current assets − current liabilities.

Example: a business with current assets of 800,000 SAR (cash 120,000, receivables 300,000 and inventory 380,000) and current liabilities of 400,000. The current ratio is 800,000 ÷ 400,000 = 2.00, the quick ratio (800,000 − 380,000) ÷ 400,000 = 1.05, the cash ratio 120,000 ÷ 400,000 = 0.30, and working capital 800,000 − 400,000 = 400,000 SAR.

The colours in the tool are general thresholds: a current ratio of 1.5 or more is good and below 1 is a risk; a quick ratio of 1 or more is good and below 0.5 is a risk.

Profitability ratios: how much is left from each riyal?

• Gross profit margin = gross profit ÷ net sales.
• Operating profit margin = operating profit ÷ net sales.
• Net profit margin = net profit ÷ net sales.
• Return on assets = net profit ÷ total assets (or their average with the previous trial balance).
• Return on equity = net profit ÷ equity (or its average).

In the same example: sales of 2,400,000 SAR, cost of sales 1,680,000, operating expenses 420,000 and finance costs 40,000, so net profit is 260,000. The gross profit margin is 720,000 ÷ 2,400,000 = 30%, the operating margin 300,000 ÷ 2,400,000 = 12.5%, and the net margin 260,000 ÷ 2,400,000 = 10.83%. Assets are 1,500,000 and equity 800,000, so return on assets is 260,000 ÷ 1,500,000 = 17.33% and return on equity 260,000 ÷ 800,000 = 32.5%.

Margins have no colours in the tool because they vary greatly from one activity to another: compare them with businesses in your activity and with your previous years.

Activity ratios: how many times does the money turn over?

• Inventory turnover = cost of sales ÷ inventory, and inventory days = inventory ÷ cost of sales × 365.
• Receivables turnover = net sales ÷ receivables, and the collection period = receivables ÷ net sales × 365.
• Payables turnover = cost of sales ÷ payables, and the payment period = payables ÷ cost of sales × 365.
• Cash conversion cycle = inventory days + collection period − payment period.
• Asset turnover = net sales ÷ total assets, and working capital turnover = net sales ÷ working capital.

In the example (payables of 250,000 SAR): inventory turnover is 1,680,000 ÷ 380,000 = 4.42 times, i.e. 82.6 days; receivables turnover 2,400,000 ÷ 300,000 = 8.00, i.e. 45.6 days; payables turnover 1,680,000 ÷ 250,000 = 6.72, i.e. 54.3 days; so the cash conversion cycle is 82.6 + 45.6 − 54.3 = 73.9 days: cash stays tied up for about 74 days between paying the supplier and collecting from the customer. Asset turnover is 2,400,000 ÷ 1,500,000 = 1.60, and working capital turnover 2,400,000 ÷ 400,000 = 6.00.

A trial balance does not separate credit sales from cash sales, nor purchases from cost of sales, so the tool calculates turnover on total sales and cost of sales, and days on 365 days. If the trial balance covers less than a year, the days will look larger than they really are.

Leverage ratios: who finances the business?

• Debt ratio = total liabilities ÷ total assets.
• Liabilities to equity = total liabilities ÷ equity.
• Equity ratio = equity ÷ total assets.
• Financial leverage = total assets ÷ equity.
• Interest coverage = profit before finance costs and Zakat ÷ finance costs.

In the example, liabilities are 700,000 SAR (400,000 current and a loan of 300,000): the debt ratio is 700,000 ÷ 1,500,000 = 46.7%, liabilities to equity 700,000 ÷ 800,000 = 0.875, the equity ratio 800,000 ÷ 1,500,000 = 53.3%, leverage 1,500,000 ÷ 800,000 = 1.875, and interest coverage 300,000 ÷ 40,000 = 7.5 times.

The colour threshold comes from the liabilities to equity ratio: 1 or less is good and more than 2 is a risk, and the other three ratios take the same colour because they are the same threshold in another form. Finance costs are as classified in the trial balance, and may include bank charges and point-of-sale fees.

The previous year's trial balance: averages and comparison

With one trial balance, the turnover and return ratios are calculated from closing balances. If you upload the previous year's trial balance, they are calculated from the average of the two balances, which is more accurate because sales were made over the whole year, not on its last day. Example: if inventory was 420,000 SAR at the end of last year and 380,000 at the end of this year, its average is (420,000 + 380,000) ÷ 2 = 400,000, and inventory turnover is 1,680,000 ÷ 400,000 = 4.20 times, i.e. 86.9 days.

A comparison table appears for each ratio: the previous year (from its own balances only), the current year, and the change.

Why does a ratio show “Not available”?

The tool does not invent a number: if the trial balance lacks what a ratio needs, “Not available” appears with the reason. For example: no inventory in a service business means no inventory turnover and no cash conversion cycle; no finance costs means no interest coverage; and negative equity means no return on equity and no financial leverage. If you think the item is there, review the account classification: the account may have a name the tool did not recognise.

Frequently asked questions

Content last reviewed: 2026-11-04