Financial Ratios

Financial Ratios turns the balance sheet into a handful of numbers a banker reads in a minute. The current ratio compares current assets to current liabilities and shows whether the company can pay its bills this year; debt to equity shows how much of the business is funded by borrowing; return on equity shows what shareholders earn on their money. BRAccount computes them from the root and group balances in the chart of accounts for the chosen year, so accounts must sit under the right groups to be counted. In the demo, cash of Rs 25,68,160 against Rs 1,40,000 of overdue supplier bills gives a current ratio above 18. A loan wrongly placed under Equity quietly flatters every ratio.

Current ratio = Current assets / Current liabilities; Debt to equity = Total liabilities / Total equity; Return on equity = Net profit / Equity

1. 01Go to Financial Reports > Financial Ratios.
2. 02Set Company, Fiscal Year 2083-2084 and Periodicity Yearly; tick Include Default Book Entries.
3. 03Read the Liquidity section: current ratio and quick ratio from Current Assets and Current Liabilities.
4. 04Read the Solvency section: debt to equity using total liabilities against Share Capital and Retained Earnings.
5. 05Read the Profitability section: return on assets and return on equity from the year's net profit.
6. 06If a ratio looks absurd, open the Balance Sheet and check which group each account sits under.
7. 07Export with Menu > Export and attach it to the loan application.

Open before a loan application or investor meeting to show liquidity and leverage in one page.

With cash Rs 25,68,160 and only Rs 1,40,000 in overdue bills, the current ratio is very healthy.