Editing Ratios

To modify the ratios that are shown in the Ratio Analysis grid, click the Edit/Delete button.

The Edit Ratios pane shows all of the available ratios for each ratio type.

To show a different ratio type, choose it from the dropdown box at the top of the pane.

Within the Edit Ratios pane:

Click Create new ratio to add a new ratio. This will open the Create new ratio screen.
Click and drag to move a ratio up or down in order in the grid.
Click the toggle button to display or hide the ratio in the grid.
Click to delete the ratio from the engagement. This cannot be reversed.
Click to edit the definition of an individual ratio. This will open the Edit ratio screen.

These changes will be applied on closing the pane.

Create new ratio / Edit ratio

The Create new ratio and Edit ratio screens allow you to define the ratio, including how it is calculated and the groups that are used in the calculation. These screens can be used to create your own custom ratios or resolve issues with any ratios that cannot be calculated.

The screen has the following inputs:

Ratio name – this is the name of the ratio as it will appear in the Ratio Analysis grid. This is required.
Ratio type – this determines which category the ratio will be shown under in the Ratio Analysis grid. The options available are Liquidity, Leverage, Activity, Profitability, and Custom.
Ratio structure – this determines the formula structure for the ratio. This is described in more detail below under Defining a ratio.
Ratio formula – this text will appear when the user clicks on in the ratio grid. This does not impact how the ratio is calculated, but helps the user to understand how the ratio is built, (for example, Current Assets / Current Liabilities).
Ratio description – this text will appear when the user clicks on in the ratio grid. You can use this to provide more information about what the ratio represents and how it should be used and interpreted.
Input, Level, Group, Value, Flip value (+/-), Average – these are used to define the ratio formula. This is described in more detail below under Defining a ratio.

Defining a ratio

A ratio is defined using an overall formula, for example (A ± B) / C, and the source of each of the inputs to that formula – A, B, and C.

The Ratio structure dropdown lists each of the formula structures that are available.

Note: Changing the formula structure will reset each of the inputs below.

For each input the following must be defined:

Level – This can be Type, Classification, Group, or Sub-group. This refers to the level of the grouping hierarchy that you want to reference under Group.

For example:

If you wanted to use Total Assets in your ratio, Assets would be a Type. (See Classifications for more information).

If you wanted to use Total Current assets in your ratio, Current assets would be a Classification. (See Classifications for more information).

If you wanted to use Total Cash & Equivalents in your ratio, Cash & Equivalents would be a group. (See Manage Financial Groups for more information).

You can also reference any custom sub-groups contained in your engagement. (See Manage Financial Sub-groups for more information).

Group – Depending on the Level previously selected, this will either show the Types, Classifications, Groups, or Sub-groups in the current engagement.
Value – After selecting the Group, this will calculate the total value for the Current year.

Flip value (+/-) – This reverses the sign of the value for the selected Group, effectively multiplying it by -1. This is useful in two broad ways:

To make a negative (credit) value positive.

For example, to make Current Liabilities (typically a credit value), behave as a positive number in the calculation, check the Flip value (+/-) box for Current Liabilities.

To make the + (plus) operator in the formula act as – (minus).

For example, to calculate (Current Assets - Trade Receivables) check the Flip value (+/-) box for Trade Receivables.

Note: To do both (make a negative value positive and use a minus operator in the formula), don’t check the Flip value (+/-) box.

Average – With this option checked, the current year ratio calculation will use the average of the current and prior year balances for the selected Group. For the prior year ratio calculation, this will use the average of the 1st and 2nd prior year balances. This is useful for ratios that require an average of opening and closing balances such as Receivables turnover.

Note: The ratio will show Not calculated if the average cannot be calculated due to missing prior year value.

Once your changes are complete, click Create ratio or Cancel to return to the Edit ratios pane.

Your new ratio will be shown under the appropriate Ratio type.

Example:

To define the Sales to Working Capital ratio, this formula is typically used:

Net Sales / (Current Assets - Current Liabilities)

First select the formula A / (B ± C)

Item A will be Revenue:

For Level, select Classification, as Revenue is a Classification.

For Group, select Revenue.

Revenue is typically a negative value, so Flip value (+/-) should be checked, so it is treated as a positive value..

Item B will be Current Assets:

For Level, select Classification, as Current Assets is a Group.

For Group, select Current Assets.

Current Assets is typically a positive value, so Flip value (+/-) should be unchecked.

Working Capital typically uses the average of opening and closing balances, so Average should be checked.

Item C will be Current Liabilities:

For Level, select Classification, as Current Liabilities is a Classification.

For Group, select Current Liabilities.

Current Liabilities is typically a negative value, so Flip value (+/-) should be checked, so it is treated as a positive value.

Working Capital typically uses the average of opening and closing balances, so Average should be checked.