{"id":11589,"date":"2023-03-02T20:49:59","date_gmt":"2023-03-02T15:19:59","guid":{"rendered":"https:\/\/razorpay.com\/blog\/?p=11589"},"modified":"2025-03-04T18:40:41","modified_gmt":"2025-03-04T13:10:41","slug":"accounting-ratios","status":"publish","type":"post","link":"https:\/\/razorpay.com\/blog\/business-banking\/accounting-ratios\/","title":{"rendered":"Accounting Ratios &#8211; A Quick Explainer"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d0a6c8c2ddd\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d0a6c8c2ddd\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/accounting-ratios\/#What_is_Accounting_Ratio\" >What is Accounting Ratio?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/accounting-ratios\/#What_Are_The_Kinds_of_Accounting_Ratios\" >What Are The Kinds of Accounting Ratios?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/accounting-ratios\/#Debt_to_Equity_Ratio\" >Debt to Equity Ratio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/accounting-ratios\/#The_Bottom_Line\" >The Bottom Line<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_Accounting_Ratio\"><\/span><strong>What is Accounting Ratio?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">An accounting ratio measures a company&#8217;s financial performance. There are many different kinds of ratios, each one measuring a different dimension of financial performance.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Accounting ratios use values from a company\u2019s financial statements: the income statement, balance sheet, and cash flow statement.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">They give insight into how much better or worse the company has performed when compared to the previous accounting period.\u00a0<\/span><\/p>\n<div style=\"width: 770px;\" class=\"wp-video\"><!--[if lt IE 9]><script>document.createElement('video');<\/script><![endif]-->\n<video class=\"wp-video-shortcode\" id=\"video-11589-1\" width=\"770\" height=\"433\" poster=\"https:\/\/d6xcmfyh68wv8.cloudfront.net\/blog-content\/uploads\/2023\/03\/Screenshot-2023-03-07-at-1.09.26-PM.png\" preload=\"metadata\" controls=\"controls\"><source type=\"video\/mp4\" src=\"https:\/\/d6xcmfyh68wv8.cloudfront.net\/blog-content\/uploads\/2023\/03\/Accounting-Ratios.mp4?_=1\" \/><a href=\"https:\/\/d6xcmfyh68wv8.cloudfront.net\/blog-content\/uploads\/2023\/03\/Accounting-Ratios.mp4\" rel=\"nofollow noopener\" target=\"_blank\">https:\/\/d6xcmfyh68wv8.cloudfront.net\/blog-content\/uploads\/2023\/03\/Accounting-Ratios.mp4<\/a><\/video><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_Are_The_Kinds_of_Accounting_Ratios\"><\/span><strong>What Are The Kinds of Accounting Ratios?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Accounting ratios can be broadly divided into 6 major types:\u00a0<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Liquidity<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Solvency<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Profitability<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Efficiency\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Coverage<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Market Prospect<\/span><\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"Debt_to_Equity_Ratio\"><\/span><strong>Debt to Equity Ratio<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Let\u2019s take the example of the debt-to-equity ratio to understand why accounting ratios are important.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The debt-to-equity ratio shows how much debt a company has when compared to its assets. The higher this ratio is, the harder it will be for the company to cover its <a href=\"https:\/\/razorpay.com\/learn\/what-is-liability-in-accounting\/\">liabilities<\/a>.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Debts include long-term and short-term loans, due vendor payments and equity includes shareholder\u2019s equity.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This ratio is used by banks and other lenders to determine how likely and quickly the business will be able to repay any loans.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_Bottom_Line\"><\/span><strong>The Bottom Line<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Along with strong financials, businesses need a solid bank to support growth.<\/p>\n<p><span style=\"font-weight: 400;\">RazorpayX allows business owners to open current accounts, <a href=\"https:\/\/razorpay.com\/x\/tax-payments\/\">pay taxes<\/a>, schedule payments, <a href=\"https:\/\/razorpay.com\/x\/vendor-payments\/\">pay vendors<\/a> seamlessly and check invoices from a single dashboard.<\/span><\/p>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/?r=blog_cta_business_banking_accounting_ratios&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Explore RazorpayX<\/a><\/div>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is Accounting Ratio? An accounting ratio measures a company&#8217;s financial performance. There are many different kinds of ratios, each one measuring a different dimension of financial performance.\u00a0 Accounting ratios use values from a company\u2019s financial statements: the income statement, balance sheet, and cash flow statement.\u00a0 They give insight into how much better or worse<\/p>\n","protected":false},"author":106,"featured_media":11590,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[27],"tags":[367,449,402],"class_list":{"0":"post-11589","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business-banking","8":"tag-accounting-for-founders","9":"tag-accounting-ratio","10":"tag-word-of-the-week"},"_links":{"self":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11589","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/users\/106"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/comments?post=11589"}],"version-history":[{"count":1,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11589\/revisions"}],"predecessor-version":[{"id":21116,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11589\/revisions\/21116"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media\/11590"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media?parent=11589"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/categories?post=11589"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/tags?post=11589"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}