Financial Data
Enter the essential financial figures below. Expand the additional sections for a comprehensive analysis.
Financial Ratio Analysis Guide for European Auditors — free PDF
ISA 520 & ISA 570 practical workbook: all formulas with visual explanations, industry benchmark reference tables from BACH for 15 industries, ratio interpretation guide, and template narrative paragraphs for audit working papers.
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ISA 520.5 — Design and perform analytical procedures near the end of the audit that assist in forming an overall conclusion.
ISA 520.A1 — Analytical procedures may include ratios such as gross margin percentages and ratio of sales to accounts receivable.
ISA 570.A3 — Negative working capital, adverse key financial ratios, operating losses, and other indicators may cast doubt on going concern.
Financial Ratio Analysis for Energy & Utilities
Energy and utility companies present unique challenges for financial ratio analysis due to commodity price volatility, decommissioning provisions, and regulated revenue structures. A 20% swing in oil or gas prices can transform a profitable E&P company into a loss-making one within a single quarter, making point-in-time profitability ratios unreliable. For ISA 520 analytical procedures, auditors should normalise profitability ratios for commodity price movements and assess underlying operational performance separately from market-driven P&L impacts.
Decommissioning provisions (IAS 37) are among the largest and most uncertain balance sheet items for energy companies. An upstream oil company's decommissioning obligations can exceed its market capitalisation. Changes in discount rates, cost estimates, and timing assumptions create significant provision movements that distort traditional ratio analysis — a provision increase reduces equity and worsens leverage ratios without any operational change. When performing going concern assessment under ISA 570, the adequacy and funding of decommissioning obligations is a key consideration.
Regulated utilities operate under tariff structures that provide revenue predictability but limit upside. EBITDA margin for regulated utilities is typically stable at 20–30%, while unregulated energy traders and producers experience much greater margin volatility. European BACH data captures both subsegments, resulting in wide quartile ranges. Auditors should segment regulated and unregulated activities when performing ratio analysis, as aggregated ratios may mask deteriorating performance in one segment.
Regulatory Context
IFRS 6 exploration and evaluation assets. IAS 37 decommissioning provisions. Commodity hedging under IFRS 9. CSRD sustainability reporting. EU Taxonomy alignment. Carbon emission trading scheme (EU ETS) accounting.
Industry-Specific Going Concern Indicators (ISA 570)
Commodity prices below breakeven cost for sustained periods
Decommissioning provision funding shortfall
Loss of regulatory licences or environmental permits
Environmental remediation obligations exceeding provisions
Project finance covenant breach or refinancing inability
Carbon price increases affecting competitiveness
Worked Example: European Energy Company
NordWind Energie AG — renewable energy producer with €35M revenue
Key results: Current Ratio: 1.11, Quick Ratio: 0.94, Gross Margin: 40.0%, Net Margin: 9.0%, ROE: 10.5%, ROA: 3.7%, D/E: 1.83, Interest Coverage: 2.0x (monitor — close to minimum), Altman Z'-Score: 2.05 (Grey Zone)