Free tool
Accounting ratio calculator
Calculate the standard IGCSE Accounting ratios for profitability, liquidity and efficiency, with a short note on what each measures. Check which ratios your board's paper expects.
How to read the result
Profitability ratios (margin, mark-up, ROCE) are shown as percentages. Liquidity ratios (current, acid-test) are shown as a figure “to one”. Efficiency measures are shown as times per period or days. A ratio means most when you compare it with earlier years or a similar business. There is no single “right” number.
Work out a ratio for two different years and look at the direction of travel. If you are unsure how to interpret what you find, send your result to us on WhatsApp.
Calculation is the easy part
This tool works out the figure quickly. In the exam, though, the calculation is usually worth only a mark or two and most of the credit comes from interpretation. A ratio means little alone. It becomes useful when you compare it with the same business over time or with a similar business.
A gross margin that falls from 34% to 30% suggests lower prices or rising costs. A current ratio that slips towards 1:1 suggests tightening liquidity. Always say what the figure means for the business and why it may have moved, instead of just quoting the number.
Ratios work in two families. Profitability ratios (gross margin, mark-up, profit margin and return on capital employed) ask how well the business turns sales and capital into profit.
Liquidity and efficiency ratios ask whether the business can pay its debts and how quickly cash moves. They are the current and acid-test ratios, inventory turnover, and the receivables and payables periods. Reading a pair together tells you more than either alone. A steady gross margin with a falling profit margin, for example, points at overheads, not pricing.
Where a teacher makes the difference
Every ratio has limits. A single year, one-off items or different accounting policies can all mislead, and knowing what a figure does not tell you wins marks. If your child can calculate ratios but struggles to write the comment that earns the marks, one of our teachers can practise interpretation with them. Bring a set of accounts to a trial class and analyse them together.
Frequently asked questions
What is the difference between mark-up and margin?
Mark-up expresses gross profit as a percentage of cost; margin expresses it as a percentage of selling price. The same sale gives two different percentages, so always check which base the question uses.
Is there an ideal figure for these ratios?
No single figure is universally “correct”. A ratio is most useful compared with the same business in earlier years, or with similar businesses. Judge the trend and the context, not a fixed target.
Which ratios does my syllabus require?
The formulae here are the standard ones used across IGCSE / International GCSE Accounting. Which ratios your paper expects, and any preferred wording, depend on your board. Check the official specification via our exam boards page.
Want help explaining what a ratio means?
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