The Balance Sheet rarely makes for thrilling reading - but it tells you whether a company can survive a downturn. UK annual reports are free to read on Companies House and company investor-relations pages.

Key takeaways

  • Net Debt to EBITDA above 3x is a yellow flag for most non-banks.
  • Current ratio below 1 suggests short-term Liquidity strain.
  • Interest Cover below 2x suggests vulnerability to rate rises.
  • Pension deficits and Lease liabilities often hide outside reported debt.
  • Free Cash Flow is the truest measure of financial health.

The three big numbers

Net debt, interest cover and free cash flow capture most of the picture for industrial businesses.

Sector-specific watchouts

Banks, insurers and miners require sector-specific metrics - Capital ratios, combined ratios, all-in sustaining costs.

Where to find the data

Annual reports filed at Companies House, plus company IR sites, give the full picture. Many UK platforms summarise Key Ratios.

What this means for UK investors

Reading the balance sheet is the most reliable check against backing companies that look cheap but are quietly running out of cash.

Risks to watch

  • Off-balance-sheet liabilities.
  • Aggressive Revenue recognition.
  • Pension scheme deficits.
  • Hidden litigation provisions.