Financial Ratios by Category diagram. This is one of the top business frameworks helping clients improve on their approach to strategy, project management, IT, HR, internal processes and client experience.Financial ratios are grouped into the following categories: 1 Liquidity ratios 2 Leverage ratios 3 Efficiency ratios 4 Profitability ratios 5 Market value ratios
The best way to use financial ratios is to conduct ratio analysis on a consistent basis. Commonly-used financial ratios can be divided into the following five categories. The liquidity or solvency ratios focus on a firm’s ability to pay its short-term debt obligations.
Profitability Ratios. Profitability ratios measure a company’s ability to generate income relative to revenue, balance sheet assets, operating costs, and equity. Common profitability financial ratios include the following: The gross margin ratio compares the gross profit of a company to its net sales to show how much profit a company makes…