You want to know if your business is stable.
You need a simple checkup.
You need plain-English insights.
You need a financial health worksheet.
Financial health checkup. Simple worksheet. Plain-English insights. Your assessment.
This guide shows you how.
Health checkup. Stability assessment. Financial worksheet. Your evaluation.
Read this. Complete the worksheet. Assess your stability.
Key Takeaways
- Use core financial ratios—current ratio, working capital, debt-to-equity ratio, and profit margin reveal financial health
- Calculate ratios easily—use our financial calculators to compute ratios quickly and accurately
- Interpret results clearly—understand what each ratio means for your business stability
- Identify warning signs—low ratios, negative working capital, or high debt indicate problems
- Take action steps—improve weak areas and maintain strong financial foundations
Table of Contents
Why Checkup Matters
Checkup reveals financial truth.
What happens without checkup:
- Problems go unnoticed
- Stability is assumed
- Risks accumulate
- Crises develop
What happens with checkup:
- Problems are identified
- Stability is assessed
- Risks are managed
- Crises are prevented
The reality: Checkup enables stability.
Liquidity Ratios
Assess liquidity:
Current Ratio
What current ratio measures:
- Ability to pay short-term debts
- Current assets vs. current liabilities
- Liquidity position
- Short-term financial health
Why it matters: Current ratio shows short-term stability.
How to calculate:
- Use our Current Ratio Calculator
- Divide current assets by current liabilities
- Target: 1.5 to 3.0 typically
What results mean:
- Below 1.0: Warning sign
- 1.0 to 1.5: Tight liquidity
- 1.5 to 3.0: Healthy
- Above 3.0: May indicate inefficiency
Pro tip: Calculate current ratio. Use our Current Ratio Calculator for quick assessment.
Working Capital
What working capital measures:
- Available cash for operations
- Current assets minus current liabilities
- Operational liquidity
- Short-term financial cushion
Why it matters: Working capital shows operational stability.
How to calculate:
- Use our Working Capital Calculator
- Subtract current liabilities from current assets
- Target: Positive and growing
What results mean:
- Negative: Critical warning
- Low positive: Tight operations
- Healthy positive: Stable operations
- High positive: Strong cushion
Pro tip: Calculate working capital. Use our Working Capital Calculator for assessment.
Leverage Ratios
Assess leverage:
Debt-to-Equity Ratio
What debt-to-equity measures:
- Financial leverage
- Debt relative to equity
- Risk level
- Financial structure
Why it matters: Debt-to-equity shows financial risk.
How to calculate:
- Use our Debt-to-Equity Ratio Calculator
- Divide total debt by total equity
- Target: Varies by industry
What results mean:
- Very high: High risk
- High: Moderate risk
- Moderate: Balanced
- Low: Conservative
Pro tip: Calculate debt-to-equity. Use our Debt-to-Equity Ratio Calculator for assessment.
Profitability Ratios
Assess profitability:
Profit Margin
What profit margin measures:
- Profitability efficiency
- Net income relative to revenue
- Earnings quality
- Financial performance
Why it matters: Profit margin shows earning power.
How to calculate:
- Use our Profit Margin Calculator
- Divide net income by revenue
- Target: Positive and growing
What results mean:
- Negative: Losing money
- Low positive: Thin margins
- Moderate: Healthy margins
- High: Strong profitability
Pro tip: Calculate profit margin. Use our Profit Margin Calculator for assessment.
Worksheet Completion
Complete the worksheet:
Step 1: Gather Financial Data
What data to gather:
- Balance sheet
- Income statement
- Cash flow statement
- Recent financial reports
Why it matters: Complete data enables accurate assessment.
Step 2: Calculate Ratios
What ratios to calculate:
- Current ratio
- Working capital
- Debt-to-equity ratio
- Profit margin
Why it matters: Ratios provide insights.
Step 3: Interpret Results
What to interpret:
- Ratio values
- Trends over time
- Industry comparisons
- Warning signs
Why it matters: Interpretation enables action.
Pro tip: Complete worksheet. Gather data, calculate ratios, interpret results. Use our calculators for accurate calculations.
Action Steps
Take action based on results:
Address Weak Areas
What weak areas to address:
- Low liquidity
- High debt
- Poor profitability
- Negative trends
Why it matters: Addressing weaknesses improves stability.
Maintain Strong Areas
What strong areas to maintain:
- Healthy liquidity
- Balanced leverage
- Good profitability
- Positive trends
Why it matters: Maintaining strengths preserves stability.
Monitor Regularly
What to monitor:
- Ratio trends
- Financial changes
- Industry shifts
- Business performance
Why it matters: Regular monitoring maintains awareness.
Pro tip: Take action. Address weak areas, maintain strong areas, monitor regularly. See our monthly review guide for ongoing monitoring.
Your Next Steps
Complete checkup. Assess stability. Take action.
This Week:
- Review this guide
- Gather financial data
- Calculate key ratios
- Complete worksheet
This Month:
- Interpret results
- Identify weak areas
- Develop action plan
- Begin improvements
Going Forward:
- Monitor ratios regularly
- Track trends
- Adjust as needed
- Maintain financial health
Need help? Check out our Current Ratio Calculator for liquidity assessment, our Working Capital Calculator for operational liquidity, our Debt-to-Equity Ratio Calculator for leverage assessment, and our Profit Margin Calculator for profitability analysis.
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FAQs - Frequently Asked Questions About Financial Health Checkup: A Simple Worksheet to See If Your Business Is Stable
What four financial ratios does the financial health checkup worksheet measure?
The worksheet measures current ratio (short-term debt coverage), working capital (operational cash cushion), debt-to-equity ratio (financial leverage), and profit margin (earning power).
Learn More...
Current ratio divides current assets by current liabilities to show whether you can pay short-term debts—a healthy range is typically 1.5 to 3.0.
Working capital subtracts current liabilities from current assets to reveal your operational cash cushion—negative working capital is a critical warning sign.
Debt-to-equity ratio divides total debt by total equity to measure financial leverage—what's acceptable varies by industry, but very high ratios signal elevated risk.
Profit margin divides net income by revenue to show your earning power—positive and growing margins indicate a healthy, sustainable business.
What does a current ratio below 1.0 mean for your business stability?
A current ratio below 1.0 means your current liabilities exceed your current assets, signaling you may not be able to pay short-term debts—a serious warning sign.
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When your current ratio drops below 1.0, it means you owe more in the short term than you have in liquid assets to cover those obligations.
This creates immediate risk: suppliers may not get paid on time, loan payments could be missed, and daily operations could be disrupted.
A ratio of 1.0 to 1.5 indicates tight liquidity that needs monitoring, while 1.5 to 3.0 is the healthy zone for most businesses.
If your ratio exceeds 3.0, it may actually indicate inefficiency—you might be holding too much cash that could be invested for growth.
How do you interpret negative versus positive working capital on the worksheet?
Negative working capital is a critical warning that liabilities exceed assets for operations, while positive working capital shows you have a cash cushion to fund daily business.
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Negative working capital means your current liabilities are greater than current assets, creating immediate cash flow pressure and default risk.
Low positive working capital means operations are running tight—you have a small cushion but limited margin for unexpected expenses.
Healthy positive working capital provides a stable operational foundation with enough cash to cover day-to-day needs and absorb fluctuations.
High positive working capital represents a strong financial cushion, though extremely high levels might mean capital could be deployed more productively.
What financial data do you need to gather before completing the checkup worksheet?
You need your balance sheet (assets, liabilities, equity), income statement (revenue, expenses, net income), cash flow statement, and any recent financial reports.
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The balance sheet provides current assets and current liabilities for the current ratio and working capital calculations, plus total debt and equity for the debt-to-equity ratio.
The income statement provides revenue and net income figures needed to calculate your profit margin.
The cash flow statement adds context about actual cash movement, which can differ significantly from what the income statement shows.
Having the most recent data ensures your checkup reflects your current financial position rather than outdated numbers.
What action steps should you take after identifying weak areas in your financial health checkup?
Address weak areas by improving low liquidity, reducing excessive debt, boosting poor profitability, and reversing negative trends—then monitor ratios regularly going forward.
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For low liquidity, work on increasing current assets through better collections, reducing current liabilities by paying down short-term debt, or building cash reserves.
For high leverage, focus on paying down debt, increasing equity through retained earnings, or refinancing to more favorable terms.
For poor profitability, review pricing strategy, identify cost reduction opportunities, and improve operational efficiency.
Maintain strong areas while fixing weak ones, and establish a regular monitoring cadence—monthly or quarterly—to catch changes before they become crises.
How often should you repeat the financial health checkup worksheet?
Perform the checkup at least quarterly, with monthly monitoring of key ratios, to catch financial changes early and maintain ongoing awareness of your business stability.
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Monthly ratio checks provide early warning of emerging problems—declining trends caught early are much easier to correct than established downward spirals.
Quarterly full worksheet completion gives you a comprehensive view of financial health trends and helps you adjust strategy based on actual performance.
Pay special attention during periods of significant change—rapid growth, seasonal fluctuations, or market shifts—when financial health can deteriorate quickly.
Track ratios over time to identify patterns and trends that single snapshots miss, and compare your results against industry benchmarks for additional context.
Sources & Additional Information
This guide provides general information about financial health checkups. Your specific situation may require different considerations.
For current ratio calculation, see our Current Ratio Calculator.
For working capital calculation, see our Working Capital Calculator.
For debt-to-equity calculation, see our Debt-to-Equity Ratio Calculator.
For profit margin calculation, see our Profit Margin Calculator.
Consult with professionals for advice specific to your situation.
