The 10 Most Important Financial Ratios for SMEs – An Overview

Financial ratios are the key management tool for every successful SME. They show at a glance whether your company is operating profitably, is financially sound, and has sufficient liquidity. But which ratios are truly critical? In this blog series, we explain the ten most important financial ratios for Swiss SMEs—in easy-to-understand terms, complete with formulas and concrete examples.

Each ratio is covered in detail in a separate in-depth article. Here you’ll find an overview with direct links to all ten articles, grouped by topic.

Profitability Ratios

Profitability ratios show how profitable your business is. They answer the question: How much does your business earn per franc of revenue or per franc of capital employed?

1. EBITDA Margin

The EBITDA margin is arguably the most widely used profitability ratio. It shows what percentage of revenue remains for your company before interest, taxes, and depreciation—a clear indicator of operational profitability. You can find all the details, the formula, and a practical example in our article EBITDA Margin Explained Simply.

2. EBIT Margin

Unlike the EBITDA margin, the EBIT margin also takes depreciation and amortization into account. It thus provides a more realistic picture of operating profitability, especially for capital-intensive companies. Learn more in EBIT Margin Explained Simply.

3. Return on Equity (ROE)

Return on equity links the income statement and the balance sheet. It shows how much profit your company generates per franc of equity invested—the key metric for owners and investors. Learn more in Return on Equity (ROE) Explained for SMEs.

4. Return on Sales

Return on sales shows the net profit after all costs, interest, and taxes. It is the most comprehensive profitability metric and particularly easy to communicate. Details, the formula, and industry benchmarks can be found in Return on Sales Simply Explained.

Liquidity Ratios

Liquidity determines your company’s short-term survival. Even profitable businesses can face crises if invoices cannot be paid on time. These three ratios provide an overview.

5. Cash Ratio 1

The Cash Ratio 1 is the strictest liquidity ratio. It shows whether your cash and cash equivalents are sufficient to settle short-term liabilities immediately. To find out when the value is too low or too high, see Liquidity Ratio 1 (Cash Ratio) for SMEs.

6. Liquidity Ratio 2 (Quick Ratio)

Liquidity Ratio 2 is the most commonly used liquidity ratio in practice. It also takes short-term receivables into account, thereby providing a more realistic picture of solvency. Learn more in Liquidity Ratio 2 (Quick Ratio) Explained Simply.

7. Working Capital

Working capital shows how much short-term capital your company actually has tied up in financing its day-to-day operations. A key performance indicator for every growing SME. Read all the details in Working Capital for SMEs Explained Simply.

Ratios for the Financing Structure

How solidly is your company financed? These two ratios show how resilient and independent your company is.

8. Equity Ratio

The equity ratio is arguably the most important indicator of financial stability. It shows what portion of your balance sheet is financed by equity—and thus how much of a buffer you have for difficult times. All figures and industry benchmarks in Equity Ratio for SMEs Simply Explained.

9. Debt-to-Equity Ratio

The debt-to-equity ratio compares debt to equity. It is the most direct indicator of your company’s financing risk. Find out when a high debt-to-equity ratio is still manageable in Debt-to-Equity Ratio Simply Explained.

Cash Flow Ratios

10. Operating Cash Flow

Profit is not the same as cash. Operating cash flow shows how much actual cash flows into your company from day-to-day operations—regardless of accounting effects such as depreciation. For many SMEs, this is the most important ratio of all. Learn more in Operating Cash Flow Simply Explained.

How to Use Key Ratios Correctly

A single ratio never tells the whole story. Only the combination of several metrics provides a complete picture of your company’s situation. Three practical tips:

Monitor trends over time. A single reporting date is just a snapshot. Only a comparison with previous periods shows whether your company is developing positively or negatively.

Compare with your industry. What constitutes a good EBITDA margin depends heavily on the industry. A retailer with a 5 percent margin is on solid footing; a software company with the same figure would be cause for concern.

Combine profitability, liquidity, and stability. Only the interplay of these three areas provides a complete picture. A company with an excellent EBITDA margin but weak liquidity is just as vulnerable as one with solid liquidity but low margins.

Conclusion: Key figures are not an end in themselves

Financial key figures are valuable when they help you make better business decisions. They show where your company is strong and where action is needed. Those who analyze their numbers regularly can identify problems early on and take targeted countermeasures.

Findea helps Swiss SMEs identify the right key figures, calculate them correctly, and interpret them accurately. With our digital tools, you’ll always have your most important financial metrics at a glance—transparent, up-to-date, and easy to understand.

Want to better understand and use your financial metrics? Schedule a no-obligation initial consultation—we’ll show you how to turn your numbers into a strategic advantage.