Ratio analysis is a vital task in any organization. It helps us to predict the institutionâ€™s strength and capabilities. In this article, we demonstrate to you how to do ratio analysis in Excel sheet format. If you are interested to estimate your own companyâ€™s ratio analysis yourself, download our free template and follow us.

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## Overview of Ratio Analysis

We deal with several types of reports regarding our organization. Among them, ratio analysis is a significant one. It is mainly a financial statement analysis report of that company that reflects the growth rate, strength, and production capabilities. In this report, we have to estimate four different types of ratios. They are discussed below:

### 1. Profitability Ratios

The elements of the profitability ratio show us the efficiency of that company to use its assets to make a profit. There are six major items that we will calculate here.

**Gross Margin**

**Gross margin** is the ratio of the difference between **Sales** and **Cost of Goods Sold (COGS)** with **Sales**. The mathematical expression of gross margin is:

**Operating Profit Margin**

**Operating Profit Margin** is the ratio of the **Earning Before Interest & Tax (EBIT)** and **Sales**. The formula to **evaluate the ratio** is:

**Net Margin**

This is the ratio of **Net Income** and **Sales**. The expression is:

**Return on Total Assets**

**Return on Total Assets** or **ROA** is the ratio of the **Earning Before Interest & Tax (EBIT)** and **Total Assets**. The mathematical formula to estimate the ratio is:

**Return on Total Equity**

**Return on Total Equity** or **ROE** is the ratio of **Net Income** and **Net Equity**. The formula is shown below:

### 2. Efficiency Ratios

The ratios show us how efficiently an organization uses its current assets or inventories in cash. We will estimate six elements in this efficiency ratio. They are:

**Receivables Turnover Ratio**

The** receivables Turnover Ratio** is the ratio of **Sales** and **Accounts Receivable**. Its mathematical formula is:

**Inventory Turnover Ratio**

It is the ratio of **Cost of Goods Sold (COGS)** and **Inventories**. The expression is:

**Payable Turnover Ratio**

The** Payable Turnover Ratio** is the ratio of **Cost of Goods Sold (COGS)** and **Accounts Payable**. Its mathematical formula is shown below:

**Asset Turnover Ratio**

The **Asset Turnover Ratio** is determined by the ratio of **Sales** and **Total Assets**. Its calculation expression is:

**Fixed Asset Turnover Ratio**

The **Fixed Asset Turnover Ratio** is the ratio of **Sales** and **Net Fixed Assets**. The formula to figure out the value is:

**Equity Turnover Ratio**

The ratio of **Sales** and **Net Equity** is called **Equity Turnover Ratio**. The expression is given below:

### 3. Liquidity Ratios

Liquidity Ratios define the organizationâ€™s cash level, liquidity position, and capability to meet the short-term liabilities. We will calculate three ratios here.

**Current Ratio**

The **Current Ratio** is the ratio of **Current Assets** and **Current Liabilities**. Its mathematical formula is:

**Quick Ratio**

The **Quick Ratio** is the ratio of the combination of **Cash and Cash Equivalents **&** Accounts Receivables** with **Current Liabilities**. The expression is given below:

**Cash Ratio**

**Cash and Cash Equivalents** with **Current Liabilities** is called a **Cash Ratio**. The formula is:

### 4. Solvency Ratios

This ratio value tells us whether the organization has the capability to fulfill its long-term responsibilities by comparing the debt level with its total assets & equity. This ratio has three elements.

**Debt-To-Equity Ratio**

The **Debt-To-Equity Ratio** is the ratio ofÂ **Total Debt** and **Net Equity.** The formula to determine the ratio is:

**Debt Ratio**

The ratio of **Total Debt** and **Total Assets** is known as a **Debt Ratio**. Its mathematical expression is:

**Interest Coverage Ratio**

The ratio of **Earnings Before Interest, Taxes, Depreciation, And Amortization (EBITDA)** and **Interest Expenses** is called **Interest Coverage Ratio**. The formula for interest coverage ratio is:

**Read More: ****Debt Service Coverage Ratio Formula in Excel**

## Advantages of Ratio Analysis

The advantage of making a ratio analysis report is given below:

- Show the strength of the organization.
- Estimate the earning capability.
- The report simplifies the financial statement report.
- Help to compare with a similar type of institution.

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## Step-by-Step Procedure to Do Ratio Analysis in Excel Sheet Format

To demonstrate the process of ratio analysis, we consider an organizationâ€™s growth and account data. The whole analysis process is described below step by step. Make sure you use the **Absolute Cell Reference** sign in the formula to avoid the unpredictable modification of cell reference.

### Step 1: Input All Required Particulars

In this step, we will input all the required specifications into **Microsoft Excel.**

- First of all, launch
**Microsoft Excel**on your device and rename the sheet according to your desire. We entitled our sheet as**Specification**. The modification of the sheetâ€™s name is not mandatory. It makes your datasheet more convenient for others. - Then, entitle your dataset with a suitable title. For that, select the range of cells
**B2:C2**and click on the**Merge & Center**option from the**Alignment**group, located in the**Home**We keep our dataset title as**Ratio Analysis Data**.

- After that, title cells
**B4**and**C4**as**Specifications**and**AmountsÂ**respectively.

- Now, input all the particulars value for your organization, denotes in the range of cells
**B5:B20**.

You have completed the first step of ration analysis in Excel sheet format.

**Read More: How to Calculate Ratio Between Two Numbers in Excel (5 Ways)**

### Step 2: Calculate All Profitability Ratios

Here, we will evaluate all the **Profitability Ratios**. There are **five elements** in the **Profitability Ratio**. We will calculate them one by one.

- At first, we will calculate the
**Gross Margin**. For that, select cell**C5**. - Now, write down the following formula into the cell.

`=(Specification!$C$5-Specification!$C$6)/Specification!$C$5`

- Press
**Enter**to get the**Gross Margin**.

- Secondly, to calculate the
**Operating Profit Margin**, select cell**C6**and write down the following formula:

`=Specification!$C$7/Specification!$C$5`

- Press the
**Enter**, and you will get the value.

- Next, we are going to determine the
**Net Margin**in cell**C7**. The formula of calculation is shown below:

`=Specification!$C$10/Specification!$C$5`

- Then, press the
**Enter**to get the result.

- After that, to estimate the
**Return on Assets**or**ROA**, write the following formula into cell**C8**.

`=Specification!$C$7/Specification!$C$12`

- Press
**Enter**on the keyboard.

- Finally, for
**Return on Equity**or**ROE**write down the following formula into cell**C9**.

`=Specification!$C$10/Specification!$C$14`

- At last, press
**Enter**to get the value of**ROE**.

Thus, we can say that you have finished the second step of ratio analysis in Excel sheet format and calculated all the required elements of the **Profitability Ratio**.

**Read More: How to Calculate Ratio Percentage in Excel (4 Easy Methods)**

### Step 3: Evaluate Every Efficiency Ratios

In this following step, we will calculate all the **Efficiency Ratios**. The **Efficiency Ratio **contains **six elements**. We are going to find their value one by one.

- In the beginning, we will determine the
**Receivables Turn-over Ratio**. To estimate its value, select cell**F5**. - Then, write down the following formula into the cell.

`=Specification!$C$5/Specification!$C$17`

- Press
**Enter**to get the value of**Receivables Turn-over Ratio**.

- Next, to figure out the
**Inventory Turn-over Ratio**, select cell**F6**and write down the following formula:

`=Specification!$C$6/Specification!$C$19`

- Similarly, press the
**Enter**, and you will get the value.

- After that, we are going to determine the
**Payable Turn-over Ratio**in cell**F7**. The formula of calculation is shown below:

`=Specification!$C$6/Specification!$C$20`

- Press the
**Enter**to get the ratio result.

- Our next item is the
**Asset Turnover Ratio**. To estimate its value, write the following formula into cell**F8**.

`=Specification!$C$5/Specification!$C$12`

- Now, press
**Enter**on the keyboard.

- Next, for evaluating the value of the
**Fixed Asset Turnover Ratio**writes down the following formula into cell**F9**.

`=Specification!$C$5/Specification!$C$13`

- Again, press
**Enter**to get the value of the**Fixed Asset Turnover Ratio**.

- At last, to compute the
**Equity Turn-over Ratio,**write down the following formula into cell**F10**.

`=Specification!$C$5/Specification!$C$14`

- Press
**Enter**to get the value of the**Equity Turn-over Ratio**.

Finally, we can say that you have completed the third step of ratio analysis in Excel sheet format and calculated all six required elements of the **Efficiency Ratio**.

**Read More: How to Convert Ratio to Decimal in Excel (3 Handy Methods)**

### Step 4: Determine Liquidity Ratios

In this step, we are going to figure out all the **Liquidity Ratios**. In the **Liquidity Ratio, **we have to find **three elements**. They are **Current, Quick,** and **Cash** Ratios. The calculation is given as follows:

- First, we are going to calculate the
**Current Ratio**. For that, select cell**C15**. - Now, write down the following formula into the cell.

`=Specification!$C$15/Specification!$C$16`

- Then, press
**Enter**to get the ratio value.

- After that, to figure out the
**Quick Ratio**, select cell**C16**and write down the following formula:

`=(Specification!$C$18+Specification!$C$17)/Specification!$C$16`

- Similarly, press the
**Enter**, and you will get the value of**Quick Ratio**.

- Next, we will determine the
**Cash Ratio**in cell**C17**. The formula to calculate the**Cash Ratio**is shown below:

`=Specification!$C$18/Specification!$C$16`

- Finally, press the
**Enter**to get the ratio result.

At last, we can say that you have accomplished the fourth step of ratio analysis in Excel sheet format and successfully estimated all three required items of the **Liquidity Ratio**.

### Step 5: Estimate Solvency Ratios

In this final calculation step. We have to evaluate the Solvency Ratios. In the **Solvency Ratio, **we will find **three elements** like the previous ratio. Their calculation procedure is given below:

- At first, we will find the
**Debt to Equal Ratio**. For that, select cell**F15**. - After that, write down the following formula into the cell.

`=Specification!$C$11/Specification!$C$14`

- Now, press
**Enter**and you will get the ratioâ€™s value.

- Then, to get the
**Debt Ratio**, select cell**F16**and write down the following formula:

`=Specification!$C$11/Specification!$C$12`

- Similarly, press the
**Enter**, and you will get the value.

- Finally, we will determine the
**Interest Coverage Ratio**in cell**F17**. The formula to calculate the ratio is shown below:

`=Specification!$C$8/Specification!$C$9`

- In the end, press the
**Enter**to get the**Interest Coverage Ratio**.

At last, we can say that you have fulfilled all the steps of ratio calculation.

### Step 6: Create Ratio Analysis Summary Report

Now, we will create a summary report of our analyzed result with some charts. This summary report is not mandatory. However, we believe that for better visualization of your data and othersâ€™ convenience, it is unavoidable. We are going to add **three charts** to this report. They will be a **pie** chart, a **column** chart, and the last one will be a **bar** chart. The whole process is explained below:

- At first, select all the four ratio calculation tables in the
**Ratio Estimation**sheet. - Now, press
**â€˜Ctrl+Câ€™**to copy them.

- Then, create a new sheet. Rename it as
**Summary**, and press**â€˜Ctrl+Vâ€™**to paste them there. - Format them according to your desire. Our formatting for this report is shown in the image below.

- Now, select the range of cells
**B10:C14**. - Then, in the
**Insert**tab, select the**drop-down arrow**of the**Insert Pie or Doughnut Chart**option and choose the**3-D Pie**option.

- The chart will appear in front of you. Set a suitable name for your chart. We set our chart title as
**Profitability Ratio**. - You can also modify your chart style and texts from the
**Design**and**Format**tabs. - We choose
**Style 8**for our chart. For that, select the**Style 8**option from the**Chart Styles**group.

- Besides it, we keep all the
**Chart Elements**for the convenience of other users.

- Next, for the column chart, select the range of cells
**B6:C8**. - In the
**Insert**tab, select the**drop-down arrow**of the**Column or Bar Chart**from the**Charts**group. - Then, select the
**Clustered Column**option from the**2-D Column**section.

- The chart will come. After that, click on the
**Chart Element**icon and checked on the**Axes, chart title,**and**Data Table**elements. - Set the chart title as
**Liquidity Ratio.**

- Besides it, we choose the
**Style 6**option from the**Chart Styles**group for our column chart.

- Finally, for the bar chart, select the range of cells
**B10:C15**. - In the same process select the
**drop-down arrow**of**Columns or Bar Chart**, and select the**Clustered Bar**option from the**2-D Bar**section.

- Now, modify the number of elements and the chart style according to your desire. We choose
**Style 3**and the**Axes, chart title,**and**Data Table**elements in this chart.

- At last, use the
**Resize**icon at the edge of the chart for better visualization and complete the task.

Finally, we can say that we have completed all the steps properly and we can perform ratio analysis in Excel sheet format.

## Conclusion

Thatâ€™s the end of this article. I hope that this article will be helpful for you and you will be able to do ratio analysis in Excel sheet format. Please share any further queries or recommendations with us in the comments section below if you have any further questions or recommendations.

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