Dr. Paul Borosky, DBA, MBA
Business Consultant & Author
Guide 23 of 34 · Financial Ratios
Financial Ratios Cheat Sheet: Formulas and Examples
26 formulas. One real company. One page.
Liquidity, asset, profitability, debt, and market ratios, each with its formula, Apple’s fiscal 2025 result, and the grade the book assigns. Use it to check your homework, prep for an exam, or size up a company you are thinking about buying.
Last Updated: 10/27/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Short Answer
What Are the Five Types of Financial Ratios?
Textbook Definition
Financial ratios express one financial statement figure relative to another. They are usually grouped into liquidity, asset utilization, profitability, debt (leverage), and market measures.
In Plain English
A ratio divides one number by another so you can compare companies of different sizes, or the same company across years. Liquidity: can it pay its bills? Asset: does it use what it owns well? Profitability: does it make money? Debt: how much does it borrow? Market: what does it mean per share?
New to ratios? Read the liquidity and profitability groups first. They are the two most beginners need, and they set up everything else on this page.
The Cheat Sheet
All 26 Ratios: Formula, Apple 2025, and Grade
Every result below is Apple’s fiscal 2025 figure from the book, calculated from its 10-K. Inventory turnover uses cost of goods sold. Times interest earned uses 2023, the last year Apple reported interest expense separately.
| Ratio and formula | Apple FY2025 | Grade |
|---|---|---|
| Liquidity ratios | ||
| Current ratio Current assets ÷ current liabilities | 0.89 | B |
| Quick ratio (Current assets − inventory) ÷ current liabilities | 0.86 | B+ |
| Cash ratio (Cash + short-term investments) ÷ current liabilities | 0.33 | B+ |
| Net working capital Current assets − current liabilities | ($17.7B) | B |
| Asset ratios | ||
| Total asset turnover Sales ÷ total assets | 1.16 | A |
| Fixed asset turnover Sales ÷ fixed assets (PP&E) | 8.35 | B+ |
| Days sales outstanding Average receivables ÷ (annual sales ÷ 365) | 61.0 days | B |
| Inventory turnover COGS ÷ average inventory | 34.0x | A |
| Accounts receivable turnover Sales ÷ average receivables | 5.98x | B |
| Accounts payable turnover (COGS + ending inventory − beginning inventory) ÷ average payables | 3.16x | A |
| Working capital turnover Sales ÷ net working capital | n/m (negative) | N/A |
| Average days in inventory 365 ÷ inventory turnover | 10.7 days | A |
| Average days payable 365 ÷ accounts payable turnover | 115.5 days | A |
| Profitability ratios | ||
| Return on assets (ROA) Net income ÷ total assets | 31.2% | A |
| Return on equity (ROE) Net income ÷ shareholders’ equity | 151.9% | C+ |
| Net profit margin Net income ÷ sales | 26.9% | A |
| Gross profit margin (Revenue − COGS) ÷ revenue | 46.9% | A |
| Operating profit margin EBIT ÷ sales | 32.0% | A |
| Basic earning power EBIT ÷ total assets | 37.0% | A |
| Return on capital employed (ROCE) EBIT ÷ (total assets − current liabilities) | 68.7% | A |
| Return on invested capital (ROIC) NOPAT ÷ invested capital | 65.1% | A |
| Debt ratios | ||
| Debt ratio Debt ÷ total assets | 27.5% | A |
| Debt-to-equity Debt ÷ shareholders’ equity | 133.8% | B+ |
| Times interest earned EBIT ÷ interest expense | 29.1x (2023) | A* |
| Market measures | ||
| Earnings per share (EPS) Net income ÷ shares outstanding | $7.49 | A |
| Dividend payout ratio Dividends paid ÷ net income | 13.8% | B+ |
Source: the book’s analysis of Apple Form 10-K filings. *Times interest earned graded on 2021 to 2023 only.
The Method
How to Use Ratios Without Fooling Yourself
A ratio is a starting point, not a verdict. Five habits keep you honest.
Compare to the company’s own past.
Read five years. Apple’s gross margin climbing from 41.8% to 46.9% means more than 46.9% alone.
Compare to a direct rival.
Apple’s current ratio of 0.89 looks weak until you see a business that throws off over $100 billion of operating cash a year.
Know what is inside the formula.
Apple’s 151.9% ROE comes partly from buybacks shrinking equity. Read the denominator before you admire the result.
Watch for missing data.
Apple stopped reporting interest expense separately after fiscal 2023, so times interest earned cannot be cleanly calculated for 2024 or 2025.
Group ratios together.
No single ratio grades a company. The book weighs all 26, then assigns one final grade: A- for Apple.
Rules of Thumb Bend
A current ratio above 1, equity near 40% to 45% of total assets: these are useful starting points. Apple breaks several of them and still earns an A- overall. Learn the rules, then learn when a strong business has a good reason to break them.
Compare It
Apple vs. Microsoft: Six Ratios Side by Side
| Ratio, fiscal 2025 | Apple | Microsoft |
|---|---|---|
| Current ratio | 0.89 | 1.35 |
| Gross margin | 47% | 69% |
| Net profit margin | 27% | 36% |
| Return on assets | 31% | 17% |
| Return on equity | 152% | 30% |
| Debt-to-equity | 134% | 12% |
From the book’s Apple vs. Microsoft comparison. Microsoft’s fiscal year ends in June.
Microsoft keeps more of each sales dollar. Apple gets more out of its assets and its equity. The DuPont analysis shows exactly why their returns differ.
Beginner Traps
What Do Beginners Get Wrong About Financial Ratios?
- Memorizing formulas without knowing what each one asks.
- Comparing ratios across industries that work differently.
- Admiring a high ROE without checking the equity behind it.
- Calculating with year-end figures when the formula calls for averages.
- Treating one year’s ratio as the trend.
- Forgetting that a negative denominator makes a ratio meaningless.
From the Book
Why Ratios Matter More Than Raw Numbers
Financial Ratios
The Power of a Benchmark
The power of financial ratios comes from their ability to show how a company is performing as a percent of a benchmark.
Five years of every ratio, the reasoning behind each grade, and Apple’s full report card. It is all in the book.
Get the Book on Amazon →Ratios for Your Own Business
The same ratios work on a $2 million company. Most owners only need a handful: gross margin, current ratio, days sales outstanding, and debt. Start with the owner guide to small business accounting and finance. Need a lender-ready set of projections with these ratios built in? See financial projections for a business plan.
Beyond the Book
Need Help With Your Own Numbers?
Do it yourself, hand it off, or work through it together.
Business Plan Templates
The statements, prebuilt. A Word plan plus an Excel model for your industry.
See the Templates →Business Plan Writing
Hand it off. Dr. Paul writes the plan and the numbers that back it up.
See Plan Writing →Business Consulting
Straight answers on the numbers that run your business, from Dr. Paul.
See Consulting Options →FAQ
Financial Ratio Questions
What are the most important financial ratios?
How many financial ratios are there?
What is a good financial ratio?
Keep Going
Related Guides
Each group has its own guide. Every term is defined in the glossary.
Written by Dr. Paul Borosky, DBA, MBA, business consultant, author, and adjunct finance instructor with an MBA focused in finance.
This page is for general educational purposes only. It is not investment, financial, tax, accounting, or legal advice, and nothing here is a recommendation to buy or sell any security. Apple and Microsoft figures come from their public filings as analyzed in the book. Apple and Microsoft are trademarks of their respective owners, and this page is not affiliated with or endorsed by either company.