Financial Ratio Calculator
Free financial ratio calculator: compute gross margin, operating margin, current ratio, debt-to-equity, and return on equity from six inputs in seconds.
Total revenue for the period (e.g., trailing 12 months).
Payroll, rent, marketing, software - everything below gross profit.
Owner’s equity from the balance sheet.
Results
Gross margin
60%
- Operating margin
- 15%
- Current ratio
- 1.6
- Debt-to-equityBelow 2.0 is commonly cited as conservative for most SMBs.
- 1.67
- Return on equityUses operating income as a pre-interest, pre-tax proxy for net income.
- 50%
On $1,000,000 of revenue you keep 60% after direct costs and 15% after operating expenses - $150,000 of operating income available to cover interest, tax, and growth.
Free and instant - nothing is stored or sent. Estimates for planning purposes, not accounting, tax, or investment advice.
Five ratios tell most of a business’s financial story: two margins that describe how profitably it operates, one liquidity ratio that describes whether it can pay its bills, and two balance-sheet ratios that describe how it is financed and what the owners earn on their stake.
This calculator computes all five from six numbers you can pull straight off your P&L and balance sheet. Run it after every month-end close - the trend across months matters more than any single reading.
The five ratios and what each answers
Gross margin (revenue − COGS, as a % of revenue) answers: how much of each sale survives direct costs? Operating margin (revenue − COGS − opex, as a % of revenue) answers: how much survives running the business? Together they separate a pricing problem from an overhead problem.
Current ratio (current assets ÷ current liabilities) answers: can we pay the next twelve months of bills? Debt-to-equity (liabilities ÷ equity) answers: how leveraged are we? Return on equity (income ÷ equity) answers: what do the owners earn on the capital they have at risk?
Worked example with the defaults
On $1,000,000 of revenue with $400,000 of COGS and $450,000 of operating expenses: gross margin is 60%, operating income is $150,000, and operating margin is 15%. With $800,000 of current assets against $500,000 of current liabilities, the current ratio is 1.6.
With $500,000 of liabilities against $300,000 of equity, debt-to-equity is 1.67. Return on equity - using the $150,000 of operating income as a pre-interest, pre-tax proxy for net income - is 50%.
How to interpret the results
No single reading is a verdict. A commonly cited pattern for healthy SMBs is stable-or-rising margins, a current ratio comfortably above 1.0, and debt-to-equity below 2.0 - but the norms vary by industry, and the trend line beats the snapshot every time.
When a ratio moves sharply between months, trace it to the ledger before reacting: a collapsing current ratio might be a real liquidity problem, or just a reclassified loan. Ratios raise questions; the close answers them.
Frequently asked questions
Which financial ratios matter most for a small business?
For day-to-day survival: the current ratio (can we pay our bills?). For the business model: gross margin and operating margin. For financing decisions: debt-to-equity. Most SMBs can manage well by tracking those monthly and investigating any move of more than a couple of points.
Why does this calculator use operating income for return on equity?
True ROE uses net income, which requires interest and tax figures. To keep the inputs to six numbers, this tool uses operating income as a pre-interest, pre-tax proxy - it will overstate ROE relative to the textbook figure, so treat it as an upper bound and note the difference when comparing.
What is a good debt-to-equity ratio?
Below 2.0 is commonly cited as conservative for most SMBs, and many lenders start asking harder questions above that. Capital-intensive industries routinely run higher. What matters most is debt service coverage: whether operating income comfortably covers the payments the debt requires.
How often should I calculate these ratios?
Monthly, as part of the month-end close package. Ratios are cheap to compute once the books are closed, and a 12-month trend chart of margins and the current ratio catches most financial problems while they are still small.
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