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- A ratio is calculated by dividing total liabilities

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by total assets.

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Ratio analysis is a tool that was developed

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to perform quantitative analysis

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on numbers found on financial statements.

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Ratios also help link

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the three financial statements together

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and offer figures that are comparable

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between companies across industries and sectors.

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Ratios analysis is one

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of the most widely used fundamental analysis techniques.

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Since this is the last opening section in the report,

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you'll want to write a brief paragraph or two

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that explains how you came up with the ratios.

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Here's an example of one we've used in the past.

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The business ratios table is a comparison

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of industry standard ratios

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for comparable sized businesses

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in the same industry as ABC LLC

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versus the projected financial ratios found

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in the business plan.

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The ratios table calculates the key business ratios

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for ABC LLC using the year end projected totals

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for each year projected.

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Corresponding industry profile ratios

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are calculated using the combined statistical data

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of comparable sized US businesses

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in the same North American Industry Classification System.

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Now create or export that data from your pro forma

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and include it in a table like this.

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These are the segments you need to create

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an effective business plan for your startup.