Every calculator on this site runs on one shared set of formula definitions. This page explains where those definitions come from, how the calculations work and how we check them.
Where the formulas come from
Each formula is based on published sources, mainly open accounting and finance textbooks, accounting standards and guidance from regulators. The sources are listed on each page and on the sources page, with the date we read them. We write our own explanations rather than copying from sources.
Sources do not always agree. Debt-to-equity, for example, is calculated with total liabilities in some texts and with interest-bearing debt only in others. Where respected sources differ, we pick one definition as the default, say which one it is, and offer the main alternatives in the calculator where that is practical.
How the calculations work
- In your browser. Calculators run on your device. The figures you enter are not sent to our server, stored, added to page addresses or passed to analytics.
- Full precision. Results are calculated at full precision and rounded only for display. Each result shows the formula with your figures substituted, step by step.
- Missing is not zero. A blank field is treated as missing, never as zero. The calculator waits for every required figure before it shows a result.
- No impossible results. When a denominator is zero, or a negative value would make a result meaningless, such as a P/E ratio with negative earnings, the calculator explains why instead of showing a number.
- Average balances. Ratios that compare a full period of income with a balance sheet figure use the average of the opening and closing balances when you enter both. With only a closing balance, the calculator uses it and says so.
- Days. Day-count measures use a 365-day year unless you change it. Some textbooks use 360 days.
How we check them
Each formula is checked against its cited sources and covered by automated tests with hand-checked inputs and results, including zero, negative and missing values. The same tests run against two separate implementations, the one in your browser and the one that produces the worked examples on our pages, so the two must always agree.
An independent review of every formula, worked example and explanation by a person with appropriate accounting or finance qualifications is under way. Pages show a review date only once that review has covered them, and the open formula dataset includes only formulas that have passed it.
What we do not do
- We do not publish “healthy” ranges or industry averages without a sourced dataset behind them. What is normal varies by industry, business model and accounting policy.
- We do not score businesses as good or bad. Ratios are a starting point for questions, not a verdict.
- We do not give personal financial, investment, tax, accounting or legal advice. See the disclaimer.
If you think a formula, example or explanation is wrong, please tell us. Our editorial policy explains how we handle corrections.