calculate_financial_ratios
Comprehensive financial ratio analysis with interpretations and trend analysis.
TOOL
Overview
The calculate_financial_ratios tool performs detailed financial analysis, calculating key ratios and providing interpretations based on industry standards.
Parameters
| Parameter | Type | Required | Description |
|---|---|---|---|
company_number | string | Yes | Company identifier |
include_trends | boolean | No | Include historical trends (default: false) |
benchmark | boolean | No | Compare to industry benchmarks (default: false) |
Response
Returns comprehensive ratio analysis including:
Liquidity Ratios
- Current Ratio - Ability to pay short-term obligations
- Quick Ratio - Immediate liquidity excluding inventory
- Cash Ratio - Cash coverage of current liabilities
- Working Capital - Operating liquidity cushion
Solvency Ratios
- Debt-to-Equity - Financial leverage
- Debt-to-Assets - Asset financing structure
- Interest Coverage - Ability to service debt
- Equity Ratio - Owner's stake in assets
Efficiency Ratios
- Asset Turnover - How efficiently assets generate revenue
- Inventory Turnover - Speed of inventory conversion
- Receivables Turnover - Collection efficiency
Profitability Ratios (when P&L data available)
- Gross Margin - Core profitability
- Operating Margin - Operational efficiency
- Net Margin - Bottom-line profitability
- Return on Assets (ROA) - Asset productivity
- Return on Equity (ROE) - Shareholder value creation
Analysis Features
- Trend Analysis - Direction over time (Improving/Stable/Declining)
- Interpretations - What each ratio means for the business
- Overall Assessment - Comprehensive financial health summary
- Strengths & Concerns - Key findings highlighted
Ratio Calculations
Liquidity Ratios
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Cash Ratio = Cash / Current Liabilities
Solvency Ratios
Debt-to-Equity = Total Debt / Shareholders' Equity
Debt-to-Assets = Total Debt / Total Assets
Interest Coverage = EBIT / Interest Expense
Equity Ratio = Shareholders' Equity / Total Assets
Efficiency Ratios
Asset Turnover = Revenue / Average Total Assets
Inventory Turnover = Cost of Sales / Average Inventory
Receivables Turnover = Revenue / Average Receivables
Example Usage
Ask Claude:
"Calculate financial ratios for company number NI664835"
Or with trends:
"Show me the financial ratio trends for company NI664835 over the last few years"
Interpretation Guidelines
Liquidity Assessment
| Ratio | Good | Average | Poor |
|---|---|---|---|
| Current Ratio | > 2.0 | 1.0-2.0 | < 1.0 |
| Quick Ratio | > 1.0 | 0.5-1.0 | < 0.5 |
| Cash Ratio | > 0.3 | 0.1-0.3 | < 0.1 |
Solvency Assessment
| Ratio | Good | Average | Poor |
|---|---|---|---|
| Debt-to-Equity | < 0.5 | 0.5-2.0 | > 2.0 |
| Interest Coverage | > 5.0 | 2.0-5.0 | < 2.0 |
| Equity Ratio | > 0.5 | 0.3-0.5 | < 0.3 |
Industry Benchmarks
The tool compares ratios against industry-specific benchmarks:
- Retail: Higher inventory turnover expected
- Technology: Lower debt ratios typical
- Manufacturing: Higher asset intensity normal
- Services: Lower working capital requirements
Best Practices
- Trend Analysis: Always include trends for context
- Peer Comparison: Compare with similar companies
- Industry Context: Consider sector-specific norms
- Multiple Periods: Analyze at least 3 years
Related Tools
quick_financial_summary- Quick metricsget_company_details- Raw financial data
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