Your Business Health Grade gives you a big-picture view of how financially healthy your company is. We look at key areas of your business and assign more weight to the ones that have the biggest impact on long-term success.
What We Look At
We group your financial data into five main categories:
Profitability – Are you making enough profit from your operations?
Liquidity – Can you cover your short-term bills and expenses?
Solvency – Are you in good shape to manage your long-term debt?
Efficiency – How well are you using your resources to run the business?
Capitalization – How is your business funded (more debt or more equity)?
How the Overall Grade Is Calculated
Each category is scored using key financial metrics. These scores are then converted to letter grades (A through F) by comparing your results to industry benchmarks related to your business.
We then apply different weights to each category based on its impact on your overall business health:
Category | Weight |
Profitability | 30% |
Liquidity | 20% |
Solvency | 20% |
Efficiency | 15% |
Capitalization | 15% |
The combined weighted score determines your overall health grade, from A (Excellent) to F (Needs Significant Improvement).
If a category contains metrics that don’t apply to your business—for example, due to your accounting method or lack of certain financial activity—we calculate that category’s score based only on the metrics that do apply. The category’s weight stays the same, but we’re transparent about what’s included and what’s excluded. See the section below on metrics that may show “N/A” for specific examples and explanations.
If you see "NM" as a grade, it either means there is not enough data to make a meaningful calculation or the resulting data is misleading/invalid and thus not useable to provide a reliable grade.
Benchmarks We Use
Below are the general financial benchmarks we use to evaluate each metric and assign a letter grade. Each industry has its own customized benchmarks, which are applied behind the scenes but not publicly shared, as they are proprietary.
Category | Metric | A | B | C | D | F |
Liquidity | Working Capital Ratio | ≥ 2.0x | 1.5–1.99x | 1.2–1.49x | 1.0–1.19x | < 1.0x |
| Quick Ratio | ≥ 1.5x | 1.2–1.49x | 1.0–1.19x | 0.8–0.99x | < 0.8x |
Profitability | Operating Margin | ≥ 15% | 10–14.9% | 5–9.9% | 1–4.9% | < 1% or negative |
| Return on Assets (ROA) | ≥ 10% | 7–9.9% | 4–6.9% | 1–3.9% | < 1% |
| Return on Equity (ROE) | ≥ 15% | 10–14.9% | 5–9.9% | 1–4.9% | < 1% |
Solvency | Interest Coverage Ratio | ≥ 5.0x | 3.0–4.9x | 2.0–2.9x | 1.0–1.9x | < 1.0x |
| Debt to Assets Ratio ↓ | ≤ 0.30x | 0.31–0.40x | 0.41–0.60x | 0.61–0.80x | > 0.80x |
| Fixed Charge Coverage Ratio (FCCR) | ≥ 2.0x | 1.5–1.99x | 1.25–1.49x | 1.0–1.24x | < 1.0x |
Capitalization | Total Debt to Capitalization ↓ | ≤ 30% | 31–40% | 41–60% | 61–80% | > 80% |
Efficiency | Days Sales Outstanding (DSO) ↓ | ≤ 30 days | 31–40 | 41–50 | 51–60 | > 60 |
| Days Sales of Inventory (DSI) ↓ | ≤ 30 days | 31–45 | 46–60 | 61–90 | > 90 |
| Days Payable Outstanding (DPO)* | 30–60 days | 21–29 or 61–75 | 14–20 or 76–90 | 7–13 or 91–120 | < 7 or > 120 |
| Asset Turnover Ratio | ≥ 2.0x | 1.5–1.99x | 1.0–1.49x | 0.5–0.99x | < 0.5x |
*For DPO, the “sweet‑spot” is moderate—not too quick, not excessively delayed. The dual‑range bands above reward a window of 30‑60 days and penalize extremes at both ends.
Why It’s Done This Way
Not all parts of your financial picture matter equally. A business that’s temporarily inefficient may still be healthy overall — but one that’s deeply unprofitable or heavily in debt may not be sustainable. That’s why we give greater weight to categories like profitability, liquidity, and solvency, which most affect long-term viability.
Our benchmark calculations are built from aggregated, real-world financial data from thousands of U.S. businesses across dozens of industries. We've compiled, standardized, and refined this data internally to ensure our grading system reflects the realities of small business performance. We analyze percentile spreads (e.g., top 25%, median, bottom 25%) for each key financial ratio—like margins, liquidity, and efficiency—and assign letter grades based on where your business falls in that distribution.
We then adjust those ranges for industry-specific factors such as capital intensity, inventory cycles, and margin structure. For example, a restaurant and a software company will be graded differently, even if they have the same profit margin, because the expectations in each industry are different.
We also account for business size. Companies under $5 million in annual revenue are measured against a more appropriate peer group to ensure fairness. These benchmarks are reviewed annually and updated if there are material shifts in small business performance trends.
🔍 Metrics That May Show "N/A" — and Why
If you see “N/A” as a grade for a specific metric, it means that metric doesn't apply to your business and was removed from affecting your overall health score. Check the table below for details on why a particular metric may show "N/A" in your case:
Metric | Why It Might Be N/A |
Days Sales of Inventory (DSI) | Your business doesn’t have inventory or doesn’t track inventory balances. |
Days Sales Outstanding (DSO) | Your business uses the cash accounting method, so accounts receivable isn’t tracked. |
Days Payable Outstanding (DPO) | Your business uses the cash accounting method, so accounts payable isn’t tracked. |
Working Capital Ratio | Your business doesn’t have any current liabilities recorded, so there’s no way to calculate the ratio. |
Quick Ratio | Your business doesn’t have any current liabilities recorded, so there’s no way to calculate the ratio. |
Interest Coverage Ratio | Your business doesn’t have any interest expenses, so there’s nothing to measure. |
Fixed Charge Coverage Ratio (FCCR) | Your business doesn’t have interest expenses and fixed charges (mortgages, lease obligations, payments on loans, etc.). |