How to Perform Balance Sheet Ratio Analysis in Excel

In this tutorial, I am going to show you step-by-step procedures to perform balance sheet ratio analysis in excel. You can quickly use these steps even in large datasets to find different balance sheet ratio values. Throughout this tutorial, you will also learn some important excel tools and techniques which will be very useful in any excel related task.


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Step-by-Step Procedures to Perform Balance Sheet Ratio Analysis in Excel

We have taken a concise excel dataset to explain the steps clearly. The dataset has approximately 6 rows and 2 columns. Initially, we formatted all the cells containing dollar values in Accounting format. For all the datasets, we have 2 unique columns as Particulars and Amount. Although we may vary the number of columns later on if that is needed.

balance sheet ratio analysis excel


Step 1: Finding Current Ratio

This criterion compares the current assets and the current liabilities of a company. This actually indicates whether a firm can cover its short-term debts with its current short-term assets which then shows the firm’s liquidity.

  • First, go to cell C10 and insert the following formula:
=C5/C6

balance sheet current ratio analysis excel

  • Now, press Enter and this will calculate the current ratio for the balance sheet.

Read More: Balance Sheet Format in Excel with Formulas (Create with Easy Steps)


Step 2: Determining Quick Ratio

The Quick Ratio gives an idea of a company’s short-term liquidity condition. It is also known as the Acid Test Ratio. This ratio measures the capability of a company to pay the current liabilities without consuming or selling the inventory. We can calculate the quick ratio by dividing the most liquid assets of a company by total current liabilities.

  • To begin with, double-click on cell C10 and enter the below formula:
=(C7+C8)/C6

balance sheet quick ratio analysis excel

  • Next, press the Enter key and you should get the quick ratio of the balance sheet values.

Read More: How to Create Vertical Balance Sheet Format in Excel


Step 3: Cash Ratio Solving

This ratio gives the indication that a company can cover short-term liabilities using only cash assets. This criterion gives a more conservative result than the ratios before as it only takes into consideration the most liquid assets.

  • To begin this method, double-click on cell C10 and insert the formula below:
=C7/C6

balance sheet cash ratio analysis excel

  • Next, press the Enter key and consequently, this will find the Cash Ratio inside cell C10.


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Step 4: Finding Debt to Equity Ratio

We can find this ratio by dividing the total liabilities by the total shareholder’s equity. If the value of this ratio is below 2, then this is generally a good indication for a company. Paying loans, increasing profits, etc. can lower this ratio.

  • To start this method, navigate to cell C10 and type in the following formula:
=C6/C9

balance sheet debt to equity ratio analysis excel

  • After that, press the Enter key or click on any blank cell.
  • Immediately, this will give you the debt to equity ratio for the dataset.

Read More: Create Projected Balance Sheet Format for Bank Loan in Excel


Step 5: Determining Debt Ratio

The Debt Ratio is also known as the Debt to Asset Ratio. This indicates the percentage of total assets that the creditor owes to the company. The financial leverage of a company largely depends proportionally on the value of this ratio.

  • As previously, insert the below formula inside cell C10:
=C6/C7

balance sheet debt ratio analysis excel

  • Finally, press the Enter key and you should get the debt ratio value.

Read More: Schedule 6 Balance Sheet Format in Excel


Step 6: Solving for Interest Coverage Ratio

This is the ratio of the EBITDA and the Interest Expense. The EBITDA stands for earning before interest, taxes, depreciation, and amortization. The higher the value of this ratio, the better it is for the company although this is not a universal criterion. To find this ratio:

  • Firstly, navigate to cell C10 and insert the following formula:
=C5/C7

balance sheet interest coverage ratio analysis excel

  • After that, press the Enter key and immediately this will give the balance sheet Interest Coverage Ratio inside cell C10.


Conclusion

I hope that you were able to apply the steps that I showed in this tutorial on how to perform balance sheet ratio analysis in excel. As you can see, there are quite a few ways to achieve this. So wisely choose the method that suits your situation best. If you get stuck in any of the steps, I recommend going through them a few times to clear up any confusion. Lastly, to learn more excel techniques, follow our ExcelDemy website. If you have any queries, please let me know in the comments.


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Nazmul Hossain Shovon

Nazmul Hossain Shovon

Hello, I am Nazmul Hossain. I am currently working full-time in Exceldemy as an Excel & VBA Content Developer. I have completed my bachelors in Naval Architecture and Marine Engineering from Bangladesh University of Engineering and Technology. I am interested in working with MS Excel. I also like coding web applications a lot.

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