Financial Ratios
Overview
Below is a business‑focused explanation of the Financial Ratios report, written for decision‑makers, finance teams, and business owners using Dafater.
Financial Ratios Report – Business Overview
What Business Information This Report Provides
The Financial Ratios report summarizes key financial relationships derived from your company’s financial statements. Instead of showing raw numbers alone, it converts financial data into ratios that highlight:
- Liquidity and cash strength
- Profitability and operating efficiency
- Financial stability and risk
- Ability to meet short‑term and long‑term obligations
This report helps management quickly understand how healthy the business is, not just how much it earned or spent.
When and Why to Use This Report
You should use the Financial Ratios report when you need to:
- Evaluate overall financial performance at a glance
- Compare financial health across periods (month, quarter, year)
- Prepare for management reviews, board meetings, or audits
- Support discussions with investors, lenders, or partners
- Identify early warning signs of cash flow or profitability issues
It is especially useful during period‑end reviews, budget planning, and strategic decision‑making.
Key Columns and What They Mean for Business
Although exact ratios may vary by configuration, the report typically includes:
Ratio Name
Identifies the financial metric being measured, such as liquidity, profitability, or leverage ratios.Current Period Value
Shows the ratio result for the selected reporting period. This reflects current financial performance or position.Previous Period Value
Displays the same ratio for an earlier period, allowing trend comparison.Change / Variance
Indicates whether the ratio has improved or declined, helping management assess progress or deterioration.Remarks or Interpretation (if available)
Provides context or categorization, such as “Healthy,” “Needs Attention,” or “Critical.”
Each ratio turns complex financial data into easy‑to‑interpret performance indicators.
Available Filters and Their Business Purpose
Common filters include:
Company
Allows selection of a specific business entity, useful for groups or multi‑company structures.Fiscal Year / Date Range
Enables comparison across financial periods to track performance trends.Period Type (Monthly, Quarterly, Yearly)
Helps align analysis with reporting cycles or management review frequency.Comparison Period
Allows side‑by‑side evaluation against a prior period to assess improvement or decline.
These filters help tailor the report to the exact business question being analyzed.
How to Interpret the Results for Business Decisions
- Strong liquidity ratios indicate the business can comfortably meet short‑term obligations.
- Improving profitability ratios suggest better cost control or revenue growth.
- High leverage ratios may signal increased financial risk and dependency on external funding.
- Declining trends over multiple periods highlight areas needing immediate attention.
Management should focus not only on individual ratios, but also on patterns over time and how different ratios relate to each other.
Common Use Cases and Scenarios
Management Review Meetings
Quickly assess financial health without reviewing full financial statements.Investor or Lender Discussions
Demonstrate financial stability and performance using standardized metrics.Strategic Planning
Identify strengths to build on and weaknesses to address in future plans.Risk Assessment
Detect early signs of liquidity stress or excessive financial exposure.Performance Benchmarking
Compare current performance against past periods or internal targets.
Summary
The Financial Ratios report in Dafater transforms accounting data into meaningful business insights. It enables leaders to understand financial health, track performance trends, and make informed decisions with confidence—without getting lost in accounting details.
Report Information
- Module: Accounts
- Related DocType: Account
- Report Type: Script Report
- Standard: Yes