Healthy" is a feeling. Ratios turn it into a grade. Four simple ones tell you whether your business can pay its bills and how much risk it's carrying.
Let's use one set of figures throughout.
Current assets £120,000. Of that, cash and debtors, the quick stuff, £90,000. Current liabilities £60,000. Total debt £100,000, equity £150,000.
Working capital is current assets minus current liabilities: the buffer for day to day operating.
Positive is good. Negative means short-term bills outweigh short-term assets: a warning light.
Current ratio: current assets divided by current liabilities. Can you cover what's due soon?
Around 1.5 to 2 is generally comfortable. Below 1 means you can't cover near-term bills from near-term assets.
The quick ratio, or acid test, is stricter: only the assets you can turn to cash fast, divided by current liabilities.
Around 1 or above means you could pay your bills without relying on slow-moving assets.
Gearing measures how much you lean on debt: debt against equity.
Some debt is fine and can fuel growth. High gearing means more risk if income dips, because the debt still has to be serviced.
Track these four every quarter and watch the trend. Rising working capital and steady ratios: you're building resilience. Falling ratios and climbing gearing: act before it's a problem.