Article
Company financial analysis: 14 ratios I read in every set of accounts
A company financial analysis is not a list of every ratio in the textbook but a dozen or so numbers arranged into five questions: does the company earn money, can it pay, can it carry its debt, how fast does it turn money over and is it growing. Below are fourteen ratios, formulas, values for the model company and what follows from them.
Author: Tomasz FordymackiPublished:
Fourteen ratios on the model company
The model company from the demo on this site, year 2025: revenue PLN 31.6m, EBITDA 3.4m, net profit 1.9m, assets 20.8m, equity 8.5m. The benchmark is the sector median assumed in the demo model.
| Ratio | Formula | Company | Sector |
|---|---|---|---|
| EBITDA margin | EBITDA ÷ revenue | 10,8 % | 9,0 % |
| Net margin | net profit ÷ revenue | 6,0 % | 4,2 % |
| ROE | net profit ÷ equity | 22,4 % | 14,0 % |
| ROA | net profit ÷ assets | 9,1 % | 5,5 % |
| Current ratio | current assets ÷ current liabilities | 1,52 | 1,45 |
| Quick ratio | (receivables + cash) ÷ current liabilities | 1,07 | 1,05 |
| Net debt ÷ EBITDA | (debt − cash) ÷ EBITDA | 0,76 | 1,80 |
| Debt ÷ equity | interest-bearing debt ÷ equity | 0,49 | 0,85 |
| Interest cover | EBIT ÷ interest | 7,4 | 5,0 |
| Receivable days | receivables ÷ revenue × 365 | 106 days | 62 days |
| Inventory days | inventory ÷ cost of sales × 365 | 64 days | 48 days |
| Asset turnover | revenue ÷ assets | 1,52 | 1,55 |
| Revenue growth | year on year | 31,1 % | 8,0 % |
| Net profit growth | year on year | 35,7 % | 6,0 % |
What follows: one number spoils a good picture
Eleven of the fourteen ratios beat the sector: the company earns more than its competitors, has little debt and grows four times faster than the market. Still, the overall score is B (75 out of 100), not A. The reason is efficiency: receivables are collected after 106 days against 62 in the sector, and inventory sits for 64 days against 48 (hence the slightly weaker asset turnover too). That is one cause, not fourteen: fast growth financed by trade credit extended to clients. If receivable days fell to 75, about PLN 2.7m of cash would be released from working capital.
How to read ratios without drawing the wrong conclusions
- Compare with the sector and with the same company a year earlier. A current ratio of 1.5 is good in trading and weak in construction.
- Read ROE together with debt: high ROE with high debt is leverage, not efficiency.
- Use average balances when the company grows fast. The year-end balance inflates receivable days in a company selling more and more.
- Check that revenue and profit grow together with cash. Profit growth with falling cash is the first sign that growth needs financing.
- Finally, name the one number management should change. A report with fourteen ratios but without that one number leads to no decision.
Frequently asked questions
Which ratios matter most in a company financial analysis?
If only three: EBITDA margin (does the company earn on operations), net debt to EBITDA (how many years it would take to repay debt from earnings) and receivable days (how many days clients borrow the company’s money). Together these three answer most of a bank’s and an investor’s questions.
Where to get data for a company financial analysis?
Polish commercial companies file their financial statements with the court register’s financial documents repository, publicly available in XML. For analysing your own company, the ledgers and trial balances are better, because they give monthly data and let you drill down to the journal entry.
How does a financial analysis differ from a rating?
A rating reduces ratios to one score with explicit weights, which makes comparing many companies easier. An analysis explains where the score came from and what to change. A rating without a narrative is useless: a B tells the board less than the sentence that receivables are collected 44 days later than in the sector.
Let’s talk about your situation
Write a few sentences about the company and the problem. I reply within one working day and the first conversation is free.
Write to me