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Types of 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.

Average Collection Period
Average Collection Period

The average collection period can be calculated using the accounts receivable turnover by dividing the number of days in the period by the metric. In this example, the average collection period is the same as before at 36.5 days (365 days / 10).

Cash Conversion Cycle
Cash Conversion Cycle

What is the 'Cash Conversion Cycle - CCC' The cash conversion cycle (CCC) is a metric that expresses the length of time, in days, that it takes for a company to convert resource inputs into cash flows.

Cash Ratio
Cash Ratio

The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities. The metric calculates a company's ability to repay its short-term debt; this information is useful to creditors when deciding how much debt, if any, they would be willing to extend to the asking party.

Current Ratio
Current Ratio

What is the 'Current Ratio' The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. To gauge this ability, the current ratio considers the current total assets of a company (both liquid and illiquid) relative to that company’s current total liabilities.

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Fixed Asset Turnover
Fixed Asset Turnover

The fixed-asset turnover ratio is a ratio which measures a company's ability to generate net sales from fixed-asset investments. The fixed-asset turnover ratio is a ratio which measures a company's ability to generate net sales from fixed-asset investments.

Inventory / Stock Turnover
Inventory / Stock Turnover

Inventory turnover is a ratio showing how many times a company has sold and replaced inventory during a period. The company can then divide the days in the period by the inventory turnover formula to calculate the days it takes to sell the inventory on hand.

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Leverage
Leverage

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.

Quick Asset Ratio
Quick Asset Ratio

The quick ratio is a liquidity ratio that measures a company's ability, using its quick assets, to pay off its current debt as they come due. The ratio derives its name presumably from the fact that assets such as cash and marketable securities are quick sources of cash.

Total Asset Turnover
Total Asset Turnover

Asset turnover ratio measures the value of a company’s sales or revenues generated relative to the value of its assets. The Asset Turnover ratio can often be used as an indicator of the efficiency with which a company is deploying its assets in generating revenue.

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