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Miraç Özdemir
Financial Ratio Analysis

Financial Health Analysis (Balance Sheet and Income Statement Ratios)

Calculates liquidity, profitability, leverage, debt service and efficiency ratios from the key balance sheet and income statement items on one screen.

Version 1

Things to keep in mind:

  • For companies with negative equity, ROE and debt-to-equity are meaningless; the tool requires positive equity. Ask your accountant about the TTK article 376 assessment.
  • What counts as a "good" ratio depends on the industry, company size and period; the thresholds in the descriptions are general references, not a credit rating.
  • Inflation adjustment, lease liabilities (TFRS 16), doubtful receivables and off-balance-sheet obligations are not modelled separately.
  • This tool is for information only and is not investment, lending or partnership advice.

Calculator

Balance sheet (period end)

TRY

Total current assets on the balance sheet.

TRY

Cash, bank balances and liquid investments under 3 months.

TRY

Trade receivables from customers (including notes receivable).

TRY

Total inventories on the balance sheet.

TRY

Current plus non-current assets.

TRY

Liabilities payable within one year.

TRY

Short and long-term bank loans and other interest-bearing debt.

TRY

Total equity on the balance sheet; must be greater than zero.

Income statement (annual)

TRY

Annual net sales revenue.

TRY

Cost of the products, goods or services sold.

TRY

Marketing, selling, general administrative and R&D expenses (excluding finance costs).

TRY

Annual depreciation included in costs or expenses.

TRY

Loan interest and similar finance costs.

TRY

Profit after tax; enter a negative value for a loss.

Debt service

TRY

Loan principal instalments due within the year (for DSCR).

After the first calculation, the result updates automatically when you change a value.

Result

Enter the values and press Calculate to see the result here.

About this tool

A financial health analysis uses one period's balance sheet and income statement to answer five questions at once: can short-term debts be paid (liquidity)? Do sales turn into profit (profitability)? How much of the funding is debt (leverage)? Does operating cash cover interest and principal (debt service)? How efficiently are assets and working capital used (efficiency)?

It runs the calculations of the individual ratio tools in one go, so you can see how a weakness in one indicator relates to the others (e.g. high profitability but weak liquidity).

Formulas

  • Gross profit = Net sales − Cost of sales
  • EBIT (operating profit) = Gross profit − Operating expenses
  • EBITDA = EBIT + Depreciation and amortisation
  • Total liabilities = Total assets − Equity
  • Current ratio = Current assets / Current liabilities
  • Quick ratio = (Current assets − Inventories) / Current liabilities
  • Cash ratio = Cash and equivalents / Current liabilities
  • Gross, EBITDA, EBIT and net margin = the profit figure / Net sales × 100
  • ROA = Net profit / Total assets × 100; ROE = Net profit / Equity × 100
  • Debt ratio = Total liabilities / Total assets × 100; Debt-to-equity = Total liabilities / Equity
  • Net debt / EBITDA = (Financial debt − Cash) / EBITDA
  • Interest coverage = EBIT / Interest expense
  • Debt service coverage ratio (DSCR) = EBITDA / (Interest expense + Principal repaid in the period)
  • Asset turnover = Net sales / Total assets
  • Days sales outstanding (DSO) = Trade receivables / Net sales × 365; Days inventory outstanding (DIO) = Inventories / Cost of sales × 365

Example: with net sales of 12,000,000 TRY, cost of sales of 8,400,000 TRY, operating expenses of 1,800,000 TRY and depreciation of 600,000 TRY, EBIT is 1,800,000 TRY and EBITDA 2,400,000 TRY (20% EBITDA margin). With 450,000 TRY of interest and 750,000 TRY of principal due in the year, DSCR = 2,400,000 / 1,200,000 = 2.00: operating EBITDA covers debt service twice.

How to read the results: compare ratios with the industry average and with the company's earlier periods rather than in isolation. Commonly quoted general thresholds (they vary by industry): a current ratio below 1 means current liabilities exceed current assets; a DSCR below 1 means EBITDA does not cover debt service; banks usually treat interest coverage below 1.5–2 and net debt/EBITDA above 3–4 as warning signs.

How to use

  1. From the balance sheet, enter current assets, cash and equivalents, trade receivables, inventories, total assets, current liabilities, financial debt (bank loans, short and long term) and equity.
  2. From the income statement, enter net sales, cost of sales, operating expenses, depreciation, finance (interest) expense and net profit or loss.
  3. For the debt service ratio, enter the loan principal falling due during the year.
  4. Press Calculate and compare the ratios with prior periods and the industry average.

Notes

Ratios are rounded to 2 decimals, days to 1 decimal and amounts to the cent (HALF_UP). When a denominator is zero (current liabilities, interest expense, debt service, cost of sales) or EBITDA is zero or negative, the ratio shows 0, meaning "not computable". Total liabilities come from the balance sheet identity (total assets − equity). Depreciation is assumed to be included in cost of sales or operating expenses. Period-end balances are used; for ROE/ROA on average balances use the Profitability Ratios tool.

Sources

Frequently asked questions

5 questions

  1. Liquidity (current and quick ratio), profitability (margins, ROA, ROE), leverage (debt ratio, net debt/EBITDA), debt service (interest coverage, DSCR) and efficiency (asset turnover, collection and inventory days) ratios are calculated from the balance sheet and income statement and compared with earlier periods and the industry average.

Next step

Related tools to continue your calculation.

All tools in Financial Ratio Analysis