Business Viability Assessment Tool

Use Comparable Financial Figures

This business viability assessment tool calculates financial indicators from your client’s records and applies your chosen review minimums. It shows where liquidity or cash needs investigation, even when the business reports a profit.

Use one entity and currency. Enter whole dollar amounts, converting figures reported in thousands before entry. The reporting-period field records the length of each profit-and-loss statement. Both periods must cover the same number of months. The calculator does not annualise sales or costs.

Match revenue, cost of sales and other expenses to that period. Use each period’s closing balance sheet for its assets and liabilities. Enter the monthly net cash outflow separately. Dividing annual expenses by twelve would miss the timing of receipts and payments.

Keep goods and services tax (GST) treatment consistent within each calculation and between periods. Recoverable GST usually sits outside revenue and expenses. Reconcile balance-sheet GST receivables or payables separately, using the same accounting policies in both periods. Mixing GST-inclusive sales with GST-exclusive costs distorts the margin.

The business.gov.au balance-sheet guide explains the snapshot basis and the need to state GST treatment. Its financial health review also brings profit-and-loss and cash flow records into the assessment.

Choose Needs review if the records use different units, periods or accounting treatments. Results become unavailable until you reconcile them. A blank required amount stays missing. Enter zero only when the records establish a nil balance.

Review Liquidity and Working Capital

Current assets equal cash plus receivables, inventory and other current assets. The current ratio divides that total by current liabilities. Working capital subtracts current liabilities from current assets.

This tool uses a cash-and-receivables quick ratio. Add balance-sheet cash and receivables, then divide by current liabilities. Inventory and all other current assets are excluded. This narrower definition excludes prepayments and other assets that may not produce cash quickly. Match a comparison threshold to this definition.

Business Queensland’s ratio guidance explains liquidity and profitability formulas and why targets depend on the business and industry. Its broader quick-ratio formula subtracts inventory from current assets. This calculator excludes other current assets as well.

Zero current liabilities make both ratios undefined because division by zero has no ratio result. A negative denominator also shows Undefined and needs a classification review. Working capital remains a subtraction. A positive result does not establish the ability to pay each debt when due.

Check receivable collectability, the inventory valuation and liability due dates. An overdue invoice can inflate current assets while providing no cash for tomorrow’s payroll. Stock may need discounting before sale. A strong ratio cannot identify those timing problems from totals alone.

Read Profitability and Cash Runway

Gross profit equals revenue less cost of sales. Net profit here equals gross profit less all other entered expenses. Include operating costs, depreciation, interest and income tax in other expenses. Do not include cost of sales twice. This definition covers the supplied sales and expenses, with no separate other-income adjustment.

Divide gross profit by revenue and multiply by 100 for gross margin. Net margin uses net profit in the same formula. Both margins are undefined when revenue is zero. A negative profit produces a negative margin when revenue is positive.

Cash runway divides unrestricted available cash by the assumed monthly net cash outflow. Use cash the business can spend, excluding restricted balances. Available cash cannot exceed the entered balance-sheet cash. A positive outflow gives runway in months, including zero months when no available cash remains.

Enter zero outflow for cash break-even. A negative outflow means cash generation. Both show their named state because a depletion horizon cannot be calculated from that assumption. They do not promise that cash will last indefinitely.

Profit includes accruals and non-cash expenses. Runway uses your separate cash assumption. A profitable client can have short runway when customers pay slowly or debt repayments consume cash. A constant monthly assumption also hides seasonality and individual due dates.

Understand the Business Health Assessment

Your business health assessment compares each unrounded indicator with the minimum you enter. Equality meets a minimum. Clear any minimum to omit that check. The summary shows each minimum and its result without combining the indicators into a weighted score.

The opening figures are a fictional annual example. Current revenue of $480,000 less cost of sales of $240,000 and other expenses of $192,000 gives $48,000 net profit. Gross margin is 50% and net margin is 10%.

Current cash of $12,000, receivables of $58,000, inventory of $35,000 and other current assets of $5,000 total $110,000. Current liabilities of $80,000 give working capital of $30,000. The current ratio displays 1.38 and the quick ratio 0.88. Total assets of $240,000 less total liabilities of $175,000 leave $65,000 net assets.

The prior annual period has revenue of $440,000, cost of sales of $220,000 and other expenses of $176,000. Net profit is $44,000 and net margin remains 10%. Its current assets of $105,000 and current liabilities of $70,000 give a current ratio of 1.5 and working capital of $35,000. Cash plus receivables total $70,000, giving a quick ratio of 1. Total assets of $230,000 less total liabilities of $165,000 also leave $65,000 net assets.

Available cash falls from $24,000 to $9,000 while monthly net outflow rises from $4,000 to $6,000. Runway falls from 6 months to 1.5 months despite the unchanged net margin. Investigate slower collections, the growth in inventory and why cash outflow rises.

The fictional minimums are 1.5 for current ratio, 1 for quick ratio, 10% for net margin and 3 months for runway. The current period misses three minimums. The prior period meets all four. These are example review choices, with no claimed industry benchmark or legal threshold.

Net assets measure the entered balance-sheet surplus or deficit. Legal solvency concerns the ability to pay debts when due. This output is neither a solvency certificate nor an insolvency diagnosis. ASIC’s guidance on financial difficulty calls for early competent accounting and legal advice when a company may be in trouble.

Every calculation runs locally. The tool sends no financial inputs to a provider and stores no figures. Clear figures empties both periods and the minimums. Reset example restores the fictional inputs.