Financial Ratios Analysis Calculator
Compute key financial ratios — including Return on Equity, Return on Assets, Debt-to-Equity, and profit margins — from a company's income statement and balance sheet. Use it during investment analysis or internal performance reviews.
About this calculator
Financial ratios condense raw accounting data into comparable performance metrics. Return on Equity (ROE) measures how efficiently a company generates profit for shareholders: ROE = (Net Income / Shareholder Equity) × 100. Return on Assets (ROA) shows how well assets are deployed: ROA = (Net Income / Total Assets) × 100. The Net Profit Margin reveals what percentage of revenue becomes profit: Net Margin = (Net Income / Total Revenue) × 100. The Debt-to-Equity ratio gauges financial leverage: D/E = Total Debt / Shareholder Equity. Taken together, these ratios allow investors and managers to benchmark a company against peers, identify over-leverage, and track profitability trends over reporting periods.
How to use
Assume a company reports Net Income of $50,000, Total Revenue of $400,000, Total Assets of $500,000, Shareholder Equity of $200,000, and Total Debt of $150,000. Enter each value into the corresponding field. The calculator returns: ROE = ($50,000 / $200,000) × 100 = 25%; ROA = ($50,000 / $500,000) × 100 = 10%; Net Margin = ($50,000 / $400,000) × 100 = 12.5%; and D/E = $150,000 / $200,000 = 0.75. A D/E below 1.0 indicates the company is primarily equity-financed, while a 25% ROE signals strong shareholder returns.
Frequently asked questions
What is a good Return on Equity ratio for evaluating a company's performance?
A ROE above 15% is generally considered strong, though benchmarks vary significantly by industry. Capital-intensive sectors like utilities often post ROEs of 10–12%, while technology firms may exceed 30%. It is important to compare ROE against industry peers rather than a universal threshold. Extremely high ROE can sometimes signal excessive financial leverage rather than genuine operating efficiency, so always examine the debt-to-equity ratio alongside ROE.
How does the debt-to-equity ratio affect a company's financial risk?
The debt-to-equity ratio measures financial leverage — how much of the company's operations are funded by debt versus owner equity. A high D/E ratio (typically above 2.0) signals greater financial risk because the company must service debt obligations regardless of revenue. During economic downturns, heavily leveraged companies face insolvency risk more quickly. Lenders and investors use D/E to set borrowing terms and required rates of return, making it a central metric in credit analysis.
Why do analysts use multiple financial ratios together instead of relying on just one?
No single ratio captures the full picture of a company's health. ROE may look impressive because of leverage rather than profitability; net margin may be high even as assets are used inefficiently. By combining profitability ratios (net margin), efficiency ratios (ROA), and leverage ratios (D/E), analysts triangulate the true drivers of performance. Cross-referencing ratios also helps detect accounting manipulation, since fabricating all metrics consistently is much harder than inflating a single line item.