Spreadsheet: 00e6a559-d336-41c0-8265-e20a5df3e2f5
Sheet: Financial Ratio - Year 1

Key Business Ratios - Year 1 (earliest) |  |  | Year ending: |  | Name of Entity on Financial Statements
Project Name |  |  | County & Municipality of Project Site |  |  |  | BP Submitted for Round
Ratios are a means of highlighting relationships between financial statement items. Generally, ratios are used in two ways: for internal analysis of items in a balance sheet; and/or for comparative analysis of a company’s ratios at different time periods and in comparison to other firms in the same industry.
To measure a company’s solvency, efficiency and profitability. The ratios are divided into three groups:
[NAME] – measure the financial soundness of a business and how well the company can satisfy its short- and long-term obligations
Efficiency Ratios – measure the quality of the firm’s receivables and how efficiently it uses and controls its assets, how effectively the firm is paying suppliers, and whether the firm is overtrading or undertrading on its equity (using borrowed funds).
Profitability Ratios – measure how well a company performs; analyze how profit was earned relative to sales, total assets and net worth.
[NAME] (5)
Name | Where to find | Function | [NAME]
[NAME] "Acid test" or "liquid" ratio | Balance Sheet | Measures the extent to which a business can cover its current liabilities with those current assets readily convertible to cash. Liquid Assets: Cash or assets that can be converted into cash without further sales effort (receivables & most marketable securities) | Cash + Accounts Receivable (net) ÷ Current Liabilities | Cash | + Accounts Receivable (net) | / Current Liabilities |  |  | TOTAL
 |  | Liquid Assets include all current assets, except inventory and prepaid expenses.
 |  | Shows number of dollars of liquid assets available to cover each dollar of current debt.
 |  | Accounts Receivable (net) includes allowance for Bad Debts
 |  | Any time the ratio is 1:1 (1.0), the business is said to be in a liquid condition. The larger the ratio, the greater the liquidity.
Current Ratio | Balance Sheet | Measures the degree to which current assets cover current liabilities. | Current Assets ÷ Current Liabilities | Current Assets | / Current Liabilities |  |  |  | TOTAL
 |  | The higher the ratio, the more likely the company will be able to meet its liabilities. A ratio of 2 to 1 (2.0) or higher is desirable.
Current Liabilities to Net Worth Ratio (%) | Balance Sheet | Indicates the amount due creditors within a year (Short Term) as a percentage of the owners' or stockholders' investment. | Current Liabilities ÷ Net Worth (Equity) | Current Liabilities | /  Net Worth (Equity) |  |  |  | TOTAL
 |  | Measures the funds creditors are risking with a business temporarily against the funds permanently invested by its owners.
 |  | Normally a business starts to have trouble when this relationship exceeds 80%.
Name | Where to find | Function | [NAME]
(Debt Ratios) Total Liabilities to Net Worth (Equity) Ratio (%) | Balance Sheet | Shows how all of the company’s debt relates to the equity of the owner or stockholders. | Total Liabilities ÷ Net Worth (Equity) | Total Liabilities | / Net Worth (Equity) |  |  |  | TOTAL
 |  | The higher this ratio, the less protection there is for creditors.
 |  | If total liabilities exceed net worth then creditors have more at stake than stockholders.
 |  | The difference between this ratio and Current Liabilities to New Worth Ratio is that it pinpoints the relative size of long-term debt, which can burden a firm with substantial interest charges.
Fixed Assets to Net Worth Equity (%) | Balance Sheet | Shows the percentage of assets centered in fixed assets compared to total equity. (Depreciated costs of Plant, Property & Equipment) | Fixed Assets ÷ Net Worth (Equity) | Fixed Assets | / Net Worth (Equity) |  |  |  | Total
 |  | Generally the higher this percentage is over 75%, the more vulnerable a concern becomes to unexpected hazards and business climate changes. Capital is frozen in the form of machinery and the margin for operating funds becomes too narrow to support day-to-day operations.
Efficiency Ratios (3)
Collection Period Ratio (Days) | Balance Sheet | Helpful in analyzing the collectibility of accounts receivable, or how fast a business can increase its cash supply. | Average Balance of Accounts Receivable ÷ Net Sales x 365 Days |  | Average Balance of Accounts Receivable |  | / Net Sales | X 365 days | TOTAL
 |  |  |  | Accts. Rec less Allowance for Doubtful Accounts | On Balance sheet at end of preceding year | Average of both
Name | Where to find | Function | [NAME]
Sales to Net Working Capital Ratio | (Net Sales) Income Statement | Measures the number of times working capital turns over annually in relation to net sales. Should be viewed in conjunction with the assets to sales ratio. | Net Sales ÷ Net Working Capital (Current Assets – Current Liabilities) | Net Sales / | (Current Assets | - Current Liabilities) |  |  | TOTAL
 |  | This ratio is usually not significant unless it is exceptionally large.  A high turnover rate can indicate overtrading (excessive sales volume in relation to the investment in the business). A high turnover may indicate that the business relies extensively upon credit granted by suppliers or the bank as a substitute for an adequate margin of operating funds.
Accounts Payable to [NAME] (%) | Balance sheet & Income Statement | Measures how the company pays its suppliers in relation to the sales volume being transacted. | Accounts Payable ÷ Net Sales | Accounts Payable | / Net Sales
 |  | A low percentage would indicate a healthy ratio. A high percentage indicates the firm may be using suppliers to help finance operations.
Profitability Ratios (3)
Return on Sales (%) | Income Statement | Measures profits after taxes on the year’s sales (profits earned per dollar of sales). | Net Profit After Taxes ÷ Net Sales | Net  Income After Taxes | ' / Net Sales
Profit Margin |  | The higher this ratio, the better prepared the business to handle downtrends brought on by adverse conditions.
Return on Assets Ratio (%) | Income Statement & Balance Sheet | The key indicator of profitability. | Net Profit After Taxes ÷ Total Assets | Net Income After Taxes | / Total Assets
 |  | A high percentage tells you the company is well run and has a healthy return on assets.
Return on Net Worth (%) | Income Statement & Balance Sheet | Measures the ability of a company’s management to realize an adequate return on the capital invested by the owners. | Net Profit After Taxes ÷ Net Worth (Equity) | Net Income After Taxes | / Net Worth (Equity)
Return on Equity