Measuring the health of your business with ratio measures

Anna Stubbs • October 2, 2024

When you’re running a business, it’s easy to get caught up in the day-to-day activity and lose sight of the big picture. Taking stock of the health of your business is important. Knowing where you are allows for more effective planning, early warning about any issues, and the chance to better chart a course for success.



There are some quick ratios that will help you to gauge the health of your business. We can help you to assess your business health and show you how to calculate these vital checks.

Liquidity Ratios

Liquidity ratios are about how quickly you can turn your business assets into cash - which helps you assess whether you’ll be able to pay the bills if cashflow gets tight.

High ratios are better, as this means you’ve got more assets than liabilities.


Current ratio

Current ratio = Total current assets / Total current liabilities

As a general guideline, 2:1 is a good current ratio, but this does depend on the kind of industry you’re in, and the nature of the assets and liabilities.


Quick ratio

Quick ratio = (Current assets – stock on hand) / Current liabilities

This measure excludes your existing stock, which you may not be able to quickly turn into cash, and is seen as a more realistic quick snapshot of your position.


Solvency ratios

Solvency ratios look at sources other than cash flow to see whether your business will be able to settle debts.


Leverage ratio

Leverage ratio = Total liabilities / Equity

This is a measure of whether your business is reliant on debt financing or equity to fund your assets. A higher ratio can make it harder to borrow money.


Debt to assets

Debt to assets = Total liabilities / Total assets

This tells you what percentage of assets is being financed by liabilities.


Profitability ratios

Profitability ratios will let you know how efficient your business operations are. Where possible, it’s good to measure your business against others in your industry.


Gross margin ratio

Gross margin ratio = Gross profit / Total sales

This ratio tells you whether you can cover the necessary business overheads from your sales.


Net margin ratio

Net margin ratio = Net profit / Total sales

This measure tells you the percentage of sales dollars left after you’ve settled your expenses, except for your income taxes.


Checking in on your business health is a great habit to get into. Using these ratios helps you to understand your current business health and allows you to plan. Talk to us about how to calculate the factors in these ratios in order to keep your business on the right track.

Understanding revenue and the true nature of profitability

By Anna Stubbs • July 15, 2026
Healthy sales revenue numbers don't always mean your small business is profitable. It's easy to mistake rising sales and income for profitability. But unless you understand your operational costs, profit margins and net profit, you won't truly know whether the business is making long-term, sustainable profit.

Tax planning helps you do more with your money

By Anna Stubbs • July 15, 2026
Tax planning is a strategic approach to managing your business’ financial affairs, with the aim of legally minimising your tax liability. In other words, you plan ahead to make sure you pay the taxes you should be paying, but not a penny more. Working with your tax adviser, you can look for deductions, credits, exemptions and tax-saving strategies that will help to optimise your company’s overall tax position.

Is your small business up to date with employment law?

By Anna Stubbs • July 15, 2026
“Just 20% of SMEs identify regulatory compliance as an organisational priority, compared with almost a third of larger firms (32%). With little or no HR support and limited guidance, small businesses often lack awareness of employment law and may struggle to comply with the changes.” CIPD Labour Market Outlook, May 2026  The recent Labour Market Outlook report from the Chartered Institute of Personnel and Development (CIPD) shows that some small and medium-sized enterprises (SMEs) have a poor awareness of employment law and are not prioritising their regulatory duty as employers. But with the Employment Rights Act 2025 introducing several recent changes to UK employment law, it’s vital that your SME is aware of current employment law and your regulatory requirements as an employer. Five recent changes to employment law that came into force from April 2026.