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Types of Financial Ratios

Activity
Activity

Activity ratios are used to measure the relative efficiency of a firm based on its use of its assets, leverage or other such balance sheet items. Accounting ratios that measure a firm's ability to convert different accounts within its balance sheets into cash or sales.

Efficiency Ratios
Efficiency Ratios

Efficiency ratios measure a company's ability to use its assets and manage its liabilities effectively. Some efficiency ratios include the inventory turnover ratio, asset turnover ratio and receivables turnover ratio. These ratios measure how efficiently a company uses its assets to generate revenues and its ability to manage those assets.

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Leverage
Leverage

A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt (loans), or assesses the ability of a company to meet its financial obligations.

Leverage Ratios
Leverage Ratios

What is a 'Leverage Ratio' A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt (loans), or assesses the ability of a company to meet its financial obligations.

Liquidity
Liquidity

Liquidity ratios are most useful when they are used in comparative form. This analysis may be performed internally or externally. For example, internal analysis regarding liquidity ratios involves utilizing multiple accounting periods that are reported using the same accounting methods.

Liquidity Ratios
Liquidity Ratios

Liquidity ratios are most useful when they are used in comparative form. This analysis may be performed internally or externally. For example, internal analysis regarding liquidity ratios involves utilizing multiple accounting periods that are reported using the same accounting methods.

Market Value Ratios
Market Value Ratios

Although a wide variety of market value ratios are in use, the most popular include earnings per share, book value per share, and the price-earnings ratio. Others include the price/cash ratio, dividend yield ratio, market value per share, and the market/book ratio.

Profitability Ratios
Profitability Ratios

What are 'Profitability Ratios' Profitability ratios are a class of financial metrics that are used to assess a business's ability to generate earnings compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or relative to the same ratio from a previous period indicates that the company is doing well.

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