Accounting ratios calculator with the working
Type in the figures from the Statement of Profit and Loss and the Balance Sheet. Every ratio whose figures you’ve given is worked out at once — with the formula and each step, using the definitions in the NCERT Class 12 textbook.
Liquidity ratios
Current ratio
2 : 1Current assets ÷ Current liabilities
4,00,000 ÷ 2,00,000
Quick (liquid / acid-test) ratio
1.2 : 1Quick assets ÷ Current liabilities, where quick assets = current assets − inventories − prepaid expenses
Quick assets = 4,00,000 − 1,50,000 − 10,000 = 2,40,000; 2,40,000 ÷ 2,00,000
Solvency ratios
Debt–equity ratio
0.5 : 1Long-term debt ÷ Shareholders’ funds (current liabilities are NOT included)
3,00,000 ÷ 6,00,000
Debt to capital employed ratio
0.33 : 1Long-term debt ÷ Capital employed, where capital employed = shareholders’ funds + long-term debt
Capital employed = 6,00,000 + 3,00,000 = 9,00,000; 3,00,000 ÷ 9,00,000
Proprietary ratio
0.67 : 1Shareholders’ funds ÷ Capital employed (net assets)
6,00,000 ÷ 9,00,000
Some guidebooks divide by total assets instead. Follow the wording of your question.
Total assets to debt ratio
3.67 : 1Total assets ÷ Long-term debt
11,00,000 ÷ 3,00,000
Interest coverage ratio
5 timesNet profit before interest and tax ÷ Interest on long-term debt
2,50,000 ÷ 50,000
Activity (turnover) ratios
Inventory turnover ratio
4.62 timesCost of revenue from operations ÷ Average inventory
Average inventory = (1,10,000 + 1,50,000) ÷ 2 = 1,30,000; 6,00,000 ÷ 1,30,000
Trade receivables turnover ratio
5 times (collection period ≈ 73 days)Credit revenue from operations ÷ Average trade receivables (debtors + bills receivable)
Average trade receivables = (1,40,000 + 1,80,000) ÷ 2 = 1,60,000; 8,00,000 ÷ 1,60,000; 365 ÷ 5 for the days
Trade payables turnover ratio
5.8 times (payment period ≈ 63 days)Net credit purchases ÷ Average trade payables (creditors + bills payable)
Average trade payables = (90,000 + 1,10,000) ÷ 2 = 1,00,000; 5,80,000 ÷ 1,00,000; 365 ÷ 5.8 for the days
Working capital turnover ratio
5 timesRevenue from operations ÷ Working capital, where working capital = current assets − current liabilities
Working capital = 4,00,000 − 2,00,000 = 2,00,000; 10,00,000 ÷ 2,00,000
Profitability ratios
Gross profit ratio
40%Gross profit ÷ Revenue from operations × 100, where gross profit = revenue − cost of revenue from operations
Gross profit = 10,00,000 − 6,00,000 = 4,00,000; 4,00,000 ÷ 10,00,000 × 100
Operating ratio
75%(Cost of revenue from operations + Operating expenses) ÷ Revenue from operations × 100
(6,00,000 + 1,50,000) ÷ 10,00,000 × 100
Operating profit ratio
25%Operating profit ÷ Revenue from operations × 100 (= 100 − operating ratio)
Operating profit = 10,00,000 − 6,00,000 − 1,50,000 = 2,50,000; 2,50,000 ÷ 10,00,000 × 100
Net profit ratio
14%Net profit after tax ÷ Revenue from operations × 100
1,40,000 ÷ 10,00,000 × 100
Return on investment (return on capital employed)
27.78%Net profit before interest and tax ÷ Capital employed × 100
Capital employed = 6,00,000 + 3,00,000 = 9,00,000; 2,50,000 ÷ 9,00,000 × 100
The four families of ratios
A single ratio tells you very little; the four groups together tell the story of a business. Liquidity ratios ask whether it can pay the bills due in the next year. Solvency ratios ask whether it can survive in the long run without drowning in debt. Activity (turnover) ratios ask how quickly it turns inventory and receivables into cash. Profitability ratios ask whether all of this effort actually earns money.
The worked example behind the calculator
A company’s revenue from operations is ₹10,00,000 (₹8,00,000 on credit), cost of revenue from operations ₹6,00,000 and operating expenses ₹1,50,000, giving a profit before interest and tax of ₹2,50,000. Interest on its ₹3,00,000 of debentures is ₹50,000, and profit after tax is ₹1,40,000. Current assets are ₹4,00,000 — including inventory of ₹1,50,000 (₹1,10,000 at the start of the year) and prepaid expenses of ₹10,000 — against current liabilities of ₹2,00,000. Shareholders’ funds are ₹6,00,000.
- Current ratio = 4,00,000 ÷ 2,00,000 = 2 : 1. The traditional comfort level is about 2 : 1.
- Quick ratio = (4,00,000 − 1,50,000 − 10,000) ÷ 2,00,000 = 1.2 : 1. A quick ratio around 1 : 1 is usually treated as safe.
- Debt–equity ratio = 3,00,000 ÷ 6,00,000 = 0.5 : 1.
- Interest coverage = 2,50,000 ÷ 50,000 = 5 times.
- Inventory turnover = 6,00,000 ÷ ((1,10,000 + 1,50,000) ÷ 2) = 4.62 times.
- Gross profit ratio = 4,00,000 ÷ 10,00,000 × 100 = 40%; operating ratio = 75%, so the operating profit ratio is 25%.
- Return on investment = 2,50,000 ÷ 9,00,000 × 100 = 27.78%.
Five traps examiners set
- Debt–equity with current liabilities. Debt means long-term debt only. Adding creditors or other current liabilities to the numerator is the most common wrong answer.
- Quick assets that still include inventory. Take out both inventories and prepaid expenses; keep trade receivables, cash and marketable securities.
- Total sales in the receivables turnover. Use credit revenue from operations. If the question gives no split, it’s common to treat all revenue as credit — say so in your answer.
- Using closing inventory instead of average. Turnover ratios use the average of opening and closing figures. Use closing only if opening isn’t given (the calculator tells you when it does this).
- Profit after tax in ROI. Return on investment uses profit before interest and tax, because capital employed includes the lenders’ money as well as the owners’.
When a ratio changes — what the examiner wants
Many questions ask whether a transaction will increase, decrease or not change a ratio. Work it out with numbers: take the example figures above, change them as the transaction would (for instance, pay ₹50,000 to creditors: current assets and current liabilities both fall by ₹50,000), and watch the ratio. Here the current ratio moves from 2 : 1 to 2.33 : 1 — it increases, because the ratio was already above 1. Try it in the calculator.
Chapter notes
By the ACES team · Last checked 6 November 2026