Financial Ratios Made Simple

Your books tell a story—but financial ratios reveal the truth. Many business owners look only at sales or profits, not realizing that liquidity, debt levels, and operational efficiency determine real stability. CRA and Revenu Québec rely on these same metrics when reviewing corporate filings and assessing financial integrity. Mackisen CPA Auditors Montreal helps businesses interpret their ratios, identify financial red flags, and build stronger balance sheets for growth and compliance.

Legal and Regulatory Framework
Income Tax Act (Canada) Section 230(1): Requires businesses to maintain records sufficient to verify financial accuracy.
CRA Policy IC78-10R5: Supports analytical review of financial ratios during audits.
Taxation Act (Quebec) Section 34: Establishes reporting standards for business solvency and tax compliance.
CPA Canada Handbook Section 1500–1520: Defines financial statement analysis and disclosure requirements.
Financial Administration Act (Quebec): Allows CRA and Revenu Québec to request financial ratio summaries during reviews.

Key Court Decisions
Beaudoin v. The Queen (2020): Used debt-to-equity and liquidity ratios to confirm financial misstatements.
Lincora Group v. Quebec (2019): Highlighted the role of ratio analysis in detecting unreported income.
Royal Bank v. Canada (2019): Denied financing due to weak current and quick ratios.
Simard Beaudry Construction v. Canada (2019): Demonstrated that profit margins must align with declared income.
Tremblay Holdings v. The Queen (2021): Reinforced that inaccurate ratios raise audit suspicion.

Why CRA Targets / Issues / Enforces
CRA compares industry-standard ratios with declared financial data. If your profit margin or liquidity appears unrealistic compared to peers, it signals underreported income or inflated expenses. Inaccurate ratio patterns also affect loan eligibility and investor confidence. Mackisen CPA Auditors Montreal applies ratio analysis to catch these inconsistencies early and improve both compliance and performance.

Mackisen Strategy
Ratio Analysis — Calculate liquidity, leverage, profitability, and efficiency ratios.
Benchmarking — Compare performance against industry and CRA standards.
Variance Review — Identify discrepancies between ratio trends and financial statements.
Cash Flow Alignment — Ensure liquidity ratios match your operational cycle.
CPA Advisory — Provide actionable recommendations to strengthen financial structure and decision-making.
Reporting — Generate visual dashboards and management summaries for investors or lenders.

Powering Client Needs and Financial Insight
A Montreal retailer identified cash shortages by analyzing its current ratio through Mackisen’s review. A Quebec manufacturer used profitability ratios to justify a line of credit increase. A Calgary tech company improved investor presentations with Mackisen-prepared financial ratio dashboards.
How Mackisen Clients Benefit

• Clear visibility into financial strengths and weaknesses

• Early detection of potential CRA audit triggers

• Enhanced loan and investment credibility

• CPA-reviewed ratio analysis for business strategy

Common Questions
Which ratios matter most? Liquidity, debt-to-equity, gross margin, and cash flow coverage.
How often should I analyze ratios? Quarterly or before major business decisions.
Can CRA request my ratio reports? Yes, during audits or financial reviews.
Will poor ratios trigger an audit? Possibly—CRA compares your data to industry averages.
Can Mackisen help correct ratio discrepancies? Absolutely, with adjustments and CPA oversight.

Why Mackisen
Mackisen CPA Auditors Montreal helps businesses decode their numbers with clarity and precision. Our CPAs transform your data into insight, strengthening both compliance and growth strategy.