5 Types of Financial Ratios

Liquidity Ratios

Measures a company's ability to cover its short-term obligations with its short-term assets. A ratio above 1 indicates liquidity.

Profitability Ratios

Measures the percentage of revenue that represents net profit. Indicates the company's efficiency in managing costs.

Efficiency Ratios

Evaluate how quickly a company sells its inventory. Higher turnover is generally favourable.

 Solvency Ratios

Indicates the proportion of a company's financing that comes from debt compared to equity. Higher ratios suggest higher financial leverage.

 Market Ratios

Compares a company's market value to its earnings. Investors use it to assess the valuation of a stock.

Read Our Blog on 7 Types of Profitability ratios and Why do They Matter?