Financial ratios are the key financial figures that describe the financial status and financial performance of the company. Here we are describing different financial ratios with their perspective and presentation in the balance sheet.
| Financial Ratio | Calculation of the ratio | Description in balance sheet |
| Working Capital | Current assets – current liabilities | In balance sheet this ratio describes that whether a company is able to fulfill its short term obligations and liabilities. The ability of a company to pay off its payments depend upon the availability of the working capital |
| Current Ratio | Current Assets/ Current Liabilities | This ratio of the balance sheet describes the relationship of the current assets to the current liabilities |
| Quick Ratio or acid test ratio | Cash + Temporary Investment +Accounts receivables/ current liabilities | In balance sheet the quick ratio is somewhat similar to the current ratio except that the inventory, supplies and prepaid expenses of a business are excluded from this ratio. This ratios gives us the details of the assets that can be converted into cash in a quick move to pay off the liabilities and related payments of the business |
| Accounts receivable turnover | Net credit sales of the year – Average accounts receivable for the year | This ratio in the balance sheet describes the number of times the accounts receivable of a business are turn over |
| Inventory Turnover ratio | Cost of goods sold within a year/ the average inventory of that year | This ratio describes the number of times in an accounting period of a business its inventory turn over |