What is CA Tushar Makkar known for?

CA Tushar Makkar is known for being AIR 47 in CA Final and creating India's largest audit community.

What services does CA Tushar Makkar offer?

He offers audit resources, courses, and expertise to chartered accountants.

What is ratio analysis in auditing?

Ratio analysis in auditing is an analytical procedure under ISA 520 where auditors compute financial ratios to identify unusual fluctuations or relationships in financial statements that may indicate material misstatements.

Which ratios are used in audit analytical procedures?

Auditors commonly use gross margin %, EBITDA margin, current ratio, debtor days, inventory days, creditor days, debt-to-equity, interest coverage ratio, and effective tax rate as part of analytical procedures.

ISA 520 is the International Standard on Auditing covering Analytical Procedures. It requires auditors to apply analytical procedures as risk assessment procedures and also near the end of the audit.

Free Ratio Analysis & Benchmarking Tool for Auditors | Master Blaster by CA Tushar Makkar

Free Tool · Audit & Assurance · Analytical Procedures

Financial Ratio Analysis & Benchmarking Tool for Chartered Accountants

A free, browser-based ratio analysis tool built specifically for CAs and auditors. Enter two years of financial statements and instantly compute 18 key financial ratios across liquidity, profitability, solvency, and efficiency — with automatic benchmarking, year-on-year variance detection, and audit flag generation aligned to ISA 520 Analytical Procedures.

✓ 18 ratios computed instantly ✓ ISA 520 & ISA 315 aligned ✓ Automatic audit flag detection ✓ Visual charts & variance tables ✓ 100% free — no login required

Ratios Computed

Analysis Categories

Years Benchmarked

ISA Standards

Ratio Analysis & Benchmarking Dashboard

Input two years of financial statements. All ratios compute instantly, variances are compared against revenue movement, and anomalies are flagged for audit follow-up.

Financial Input

Variance Analysis

Ratio Analysis

Audit Flags

Charts

Enter all values in ₹ Lakhs (or any consistent unit). Leave blank if not applicable. Enter both years for variance detection. Year 1 = prior year, Year 2 = current year.

Profit & Loss Statement

Revenue (Year 1 — Prior)

Revenue (Year 2 — Current)

Cost of Goods Sold — Y1

Cost of Goods Sold — Y2

Gross Profit — Y1

Gross Profit — Y2

Operating Expenses — Y1

Operating Expenses — Y2

EBITDA — Y1

EBITDA — Y2

Depreciation & Amortisation — Y1

Depreciation & Amortisation — Y2

Interest / Finance Cost — Y1

Interest / Finance Cost — Y2

Profit Before Tax — Y1

Profit Before Tax — Y2

Tax Expense — Y1

Tax Expense — Y2

Profit After Tax — Y1

Profit After Tax — Y2

Balance Sheet

Fixed Assets / PPE — Y1

Fixed Assets / PPE — Y2

Inventory — Y1

Inventory — Y2

Trade Debtors — Y1

Trade Debtors — Y2

Cash & Bank — Y1

Cash & Bank — Y2

Other Current Assets — Y1

Other Current Assets — Y2

Total Assets — Y1

Total Assets — Y2

Trade Payables — Y1

Trade Payables — Y2

Short-term Borrowings — Y1

Short-term Borrowings — Y2

Total Current Liabilities — Y1

Total Current Liabilities — Y2

Long-term Debt — Y1

Long-term Debt — Y2

Total Debt — Y1

Total Debt — Y2

Shareholders' Equity — Y1

Shareholders' Equity — Y2

Year Labels & Variance Threshold

Prior year label

Current year label

Variance flag threshold (%)

Variance flag logic: Any P&L line item that moves by more than the threshold above revenue growth is flagged as an anomaly requiring audit explanation. Balance sheet items are flagged if they move more than 2× the threshold in absolute percentage terms.

Enter financial data on the Input tab and click Calculate.

Step-by-step guide

How to use this ratio analysis tool

Designed for audit planning and analytical review — enter your client's financial data and get a full analysis in under two minutes.

Enter P&L data for two years

Input revenue, COGS, gross profit, EBITDA, depreciation, interest, PBT, tax, and PAT for both the prior and current financial year.

Enter balance sheet figures

Add fixed assets, inventory, trade debtors, cash, payables, borrowings, total debt, and shareholders' equity for both years.

Set your variance threshold

Choose a flag threshold (default 10%). Any line item moving more than this above revenue growth will be automatically flagged for audit explanation.

Click Calculate & Analyse

Instantly generates the variance table, 18 computed ratios with benchmarks, a consolidated audit flags panel, and four visual charts.

Review audit flags

Red flags require documented audit explanation. Amber watch items should be monitored and discussed with the client during fieldwork.

Use in working papers

Transfer flagged ratios and variances into your ISA 520 analytical procedures working paper as the basis for risk assessment and further procedures.

Reference guide

Financial ratios computed by this tool

All 18 ratios are benchmarked against general industry norms. Auditors should apply professional judgment — benchmarks vary by sector and entity size.

💧

Liquidity Ratios

Ability to meet short-term obligations

Current Ratio

Current Assets ÷ Current Liabilities

Core measure of short-term solvency. Below 1.0 means current liabilities exceed current assets — a significant going concern indicator.

1.5x–2.5x

Quick Ratio (Acid Test)

(Current Assets − Inventory) ÷ Current Liabilities

Excludes inventory as it may not convert quickly to cash. A stricter test of immediate liquidity, particularly relevant for manufacturing clients.

1.0x–1.5x

Cash Ratio

Cash & Bank ÷ Current Liabilities

Most conservative liquidity ratio. Very low values can signal reliance on receivables and inventory for meeting obligations.

0.5x–1.0x

📈

Profitability Ratios

Ability to generate returns from operations

Gross Profit Margin

Gross Profit ÷ Revenue × 100

A sudden drop without a corresponding revenue explanation is a primary indicator of revenue understatement or cost overstatement.

30%–60%

EBITDA Margin

EBITDA ÷ Revenue × 100

Operating profitability before non-cash and financing items. Best indicator of core business performance.

15%–30%

Net Profit Margin

PAT ÷ Revenue × 100

Bottom-line profitability after all deductions. Divergence from EBITDA margin may indicate tax or finance anomalies.

5%–20%

Return on Equity (ROE)

PAT ÷ Shareholders' Equity × 100

Measures returns generated for equity shareholders. A sharp increase may warrant scrutiny of equity base reduction or profit inflation.

15%–25%

Return on Assets (ROA)

PAT ÷ Total Assets × 100

Efficiency of asset deployment to generate profit. Declining ROA with stable margins may indicate asset bloat or capitalisation of expenses.

5%–15%

🏛

Solvency Ratios

Long-term financial stability and debt capacity

Debt to Equity (D/E)

Total Debt ÷ Shareholders' Equity

Measures financial leverage. A D/E above 2x in Indian SMEs is often a red flag. Rapid rise may indicate undisclosed borrowings or equity erosion.

0x–2x

Debt to EBITDA

Total Debt ÷ EBITDA

Indicates how many years of operating cash flow are needed to repay debt. Above 3x typically signals elevated credit risk.

0x–3x

Interest Coverage Ratio

EBITDA ÷ Interest Expense

Ability to service interest from operations. Below 1.5x is a strong going concern indicator. Also verifies reasonableness of interest expense disclosures.

3x–10x

⚙️

Efficiency Ratios

How effectively assets and working capital are managed

Debtor Days (DSO)

Trade Debtors ÷ (Revenue ÷ 365)

Average days to collect receivables. Rising debtor days may indicate fictitious sales, round-tripping, or collection deterioration.

30–60 days

Inventory Days

Inventory ÷ (COGS ÷ 365)

Average days inventory is held. Increasing inventory days with declining sales may indicate slow-moving, obsolete, or overstated inventory.

30–90 days

Creditor Days (DPO)

Trade Payables ÷ (COGS ÷ 365)

Average days to pay suppliers. A sharp drop may indicate cash flow pressure; a sharp increase may indicate undisclosed disputes or payment deferrals.

30–60 days

Asset Turnover

Revenue ÷ Total Assets

Efficiency of total asset base in generating revenue. A declining trend may indicate idle assets, fictitious asset additions, or overstated asset values.

0.5x–2.0x

Regulatory framework

ISA standards this tool supports

The analytical procedures and flag logic in this tool are designed to support compliance with the following International Standards on Auditing as adopted in India.

ISA 520

Analytical Procedures

Requires auditors to apply analytical procedures as risk assessment procedures and as substantive procedures. This tool supports both the planning and final review stages by flagging relationships that deviate from expected patterns.

ISA 315

Identifying and Assessing Risks of Material Misstatement

Ratio anomalies flagged by this tool can directly inform the risk assessment process under ISA 315, helping auditors identify assertions at risk and design appropriate audit responses.

ISA 330

Responses to Assessed Risks

Once risks are identified through ratio analysis, ISA 330 governs how auditors should respond. Flagged items from this tool can be mapped directly to specific audit procedures designed to address the identified risks.

Frequently asked questions

Common questions about ratio analysis in auditing

Answers for CA students, articleship trainees, and practising auditors.

What is ratio analysis in the context of an audit?

Ratio analysis is a form of analytical procedure under ISA 520 where auditors compute mathematical relationships between financial statement line items. These ratios are compared against prior year figures, industry benchmarks, and management's budgets. Unusual movements or out-of-range values generate audit queries that the client must explain, helping the auditor identify areas of potential material misstatement without testing every transaction individually.

What is a good current ratio for Indian companies?

A current ratio between 1.5x and 2.5x is generally considered healthy for most Indian companies. A ratio below 1.0x means current liabilities exceed current assets and is a going concern indicator that requires immediate audit attention. A ratio above 3.0x, while seemingly safe, may indicate excessive inventory build-up or inefficient deployment of current assets. The benchmark varies significantly by industry — capital goods and infrastructure companies often operate with lower ratios than FMCG or IT firms.

How does the variance flag logic in this tool work?

The tool uses revenue growth as the baseline benchmark. Any P&L line item (COGS, gross profit, EBITDA, etc.) that moves by more than the set threshold above the revenue growth rate is flagged as an anomaly. For example, if revenue grew 10% but COGS grew 25%, the 15% excess triggers a red flag. For balance sheet items, the threshold is doubled — items moving more than 2× the threshold in absolute terms are flagged. This approach mirrors the analytical procedure logic prescribed in ISA 520.

What is ISA 520 and why does it matter for CAs?

ISA 520 — Analytical Procedures — is an International Standard on Auditing that requires auditors to apply analytical procedures at two stages: during risk assessment (planning) and near the end of the audit as an overall review. For Indian CAs, SA 520 (the ICAI equivalent) mirrors ISA 520. Non-compliance with analytical procedures is one of the common quality control findings in peer reviews.

Which ratios are most important for audit planning?

For audit planning, the most critical ratios are: (1) Gross Margin % — a leading indicator of revenue or cost manipulation; (2) Debtor Days — rising DSO can signal fictitious sales; (3) Inventory Days — increasing holding periods may indicate obsolete or overstated stock; (4) Interest Coverage — a declining ratio flags going concern risk; (5) Effective Tax Rate — a large change from prior year warrants scrutiny of deferred tax assets or tax provisions.

Can this tool be used for management accounts or only statutory audits?

This tool works equally well for: management accounts review, internal audit planning, due diligence assignments, bank credit analysis, and investor ratio analysis. Any scenario requiring a structured two-year financial ratio comparison with anomaly detection can benefit from this tool. The variance threshold is fully adjustable to suit different materiality levels.

Is my financial data stored or shared when I use this tool?

No. This tool runs entirely in your browser. All calculations happen locally using JavaScript — no data is sent to any server, stored in any database, or shared with any third party. You can verify this by using the tool offline after the page loads. This makes it safe to use with client financial data without any confidentiality concerns.

About the creator

Built by CA Tushar Makkar

CA Tushar Makkar

Chartered Accountant · Audit & Assurance Specialist

CA Tushar Makkar is a practising Chartered Accountant specialising in audit & assurance, financial reporting, and CA education. The Master Blaster tool suite was built to give CAs, audit teams, and CA students access to structured, professional-grade audit tools that are free, fast, and browser-based — without relying on expensive software or complex Excel models. All tools are grounded in ISA/SA standards and reflect real-world audit practice.

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Professional disclaimer: This tool is provided for audit planning and analytical procedures guidance only. All ratio benchmarks are indicative general norms and may vary significantly by industry, entity size, and economic conditions. The tool does not constitute professional audit advice. Auditors must apply professional judgment in all cases. CA Tushar Makkar accepts no liability for decisions made based solely on this tool's output. Always refer to applicable ISA/SA standards and your firm's audit methodology. All calculations run locally in your browser — no data is transmitted or stored.

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