Ratios derived from the annual accounts

You can calculate so-called 'ratios' from the annual accounts to gain a picture of a company's financial position. How these ratios can be evaluated differs mostly according to business sector. The Chamber of Commerce itself calculates ratios with regard to:

• liquidity
• solvency
• profitability 

Liquidity tells you something about the ability of the company to meet its obligations in the short term. In other words: can the company pay its creditors on time?

Solvency is the relationship between 'own' capital and 'borrowed' capital. Can the company pay off its debts at the end of the day? This is more a ratio in respect of the long term.

Profitability is the relationship between revenue and the capital used to produce that revenue. It could also be described as the relationship between the capital which the entrepreneur has invested in the business and the profit generated by this.