Support your figures
Read financial statements in 10 minutes
Start with three questions: what does the business own, what does it earn and where does the cash go? This reading order connects the figures. Have a full balance sheet, profit and loss statement and comparison year ready. A ratio becomes useful when you understand the accounts behind it.
Minutes 1–3: read the balance sheet
The balance sheet is a snapshot on one date. Assets include long-lived investments and current assets. Equity and liabilities explain how those assets are funded. Both sides must have the same total. Check whether the annual result is already included in equity before adding it again.
Our fictional business has €60,000 in non-current assets and €50,000 in current assets. Funding consists of €50,000 equity, €30,000 non-current liabilities and €30,000 current liabilities. Both sides total €110,000. Solvency equals €50,000 / €110,000 × 100% = 45.45%. This describes book values; asset resale values may differ.
Minutes 4–5: follow revenue through to net profit
Profit and loss covers a period. Deduct €100,000 cost of sales from €240,000 revenue to obtain €140,000 gross profit. After €65,000 staff costs and €30,000 other operating expenses, EBITDA is €45,000. Deduct €10,000 depreciation to reach €35,000 EBIT. After €3,000 interest and €6,000 tax, net profit is €26,000.
Check whether exceptional income or expenses distort the year. Compare equivalent cost categories. A management fee moved from other expenses to staff costs changes the breakdown without necessarily changing total profit. For ROE we divide net profit by average equity. This tool calculates ROA as EBIT divided by average total assets.
Minutes 6–8: check liquidity and cash flow
A profitable business can run short of cash when customers pay late or inventory increases. Our €50,000 current assets consist of €20,000 inventory, €15,000 receivables, €10,000 cash and €5,000 other assets. The current ratio is 1.67; excluding inventory, the quick ratio is 1.00. Net working capital is €20,000.
For indirect cash flow we use operating working capital excluding cash and financing. In this example it rises from €7,000 to €10,000. The additional €3,000 is tied up in operations. Net profit €26,000 + depreciation €10,000 − working-capital increase €3,000 gives €33,000 operating cash flow. After €15,000 net cash investment, free cash flow is €18,000.
This simplified model is not a complete cash-flow statement. Other non-cash items, acquisitions, financing flows and dividends need further reconciliation. Also inspect due dates: a strong balance-sheet ratio does not establish whether next week's bank balance will be sufficient.
| Step | Calculation | Result |
|---|---|---|
| Gross profit | 240,000 − 100,000 | 140,000 |
| EBITDA | 140,000 − 65,000 − 30,000 | 45,000 |
| Net profit | 45,000 − 10,000 − 3,000 − 6,000 | 26,000 |
| Operating cash flow | 26,000 + 10,000 − 3,000 | 33,000 |
| Free cash flow | 33,000 − 15,000 | 18,000 |
Minutes 9–10: ask focused follow-up questions
Compare two complete years with consistent accounting policies. Use opening and closing balances for average capital and turnover periods. Rekenbox uses the previous year's closing balances when a third balance sheet is unavailable; allow for that difference. Investigate the reasons for change: new funding, debt repayments, growing inventory or shifting margins.
KVK gives general reference ranges of 25% to 40% for solvency, 1.2 to 1.5 for the current ratio and at least 1 for the quick ratio. Use them as orientation. Industry, payment terms and financing agreements may require another assessment. Tool colours are not a credit assessment.
Use an XAF or trial-balance import to reduce retyping. RGS codes provide classification proposals; review every account, including unknown codes and exclusions. Add investment amounts and missing cash-flow adjustments separately. Keep the source with the result so an accountant or lender can trace the same figures.
Common questions
How does a balance sheet differ from profit and loss?
A balance sheet shows assets and funding on one date. Profit and loss shows income and expenses over a period. Retained net profit connects the two, together with contributions, distributions and other equity movements.
Is EBITDA the same as cash in the bank?
No. EBITDA does not account for payment timing, investment, interest, tax or debt repayments. Calculate cash flow separately and review monthly receipts and payments.
What if a ratio is unavailable?
A zero or negative denominator, or a missing comparison year, may prevent a meaningful result. A dash means missing information or an unusable ratio. Do not replace it with zero.
Can this support a financing application?
You can bring reviewed figures, formulas and sources. Confirm with the lender which documents and periods are required. The optional report supports your inputs and contains no accountant's assurance.
Sources and product scope
The worked examples were prepared by Rekenbox for explanation. Product behaviour and source references were checked on the stated update date.
General solvency and liquidity reference ranges. Checked 6 September 2026. KVK · Financiële kengetallen en referentiewaarden ↗
Reference for reviewed classification proposals on import. Checked 6 September 2026. Referentie GrootboekSchema · RGS 3.7 ↗
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