In identifying four types of financial ratios it is important to keep in mind that ratios are only meaningful when compared to other ratios set by standards of a particular entity. There are five categories of financial ratios; liquidity helps a company analyze their ability to meet short-term obligations, activity analyzes how quickly assets can be turned into cash or sales, profitability helps to analyze management's ability to control expenses and earn money through company resources, debt helps measure the effect of borrowed funds for company financing (CSUL, 2007), and market which helps investors decide how the firm is doing. (Gitman, 2006) All ratios are derived from easy calculated formulas using basic math skills.
Under each category fall specific ratios of which I will identify four stating what they can tell you about a company. The first ratio is Current ratio=Current assets/Current liabilities. This ratio lies in the liquidity category. It measures the......

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Title: Financial Ratios
Approximate Word Count: 552
Approximate Pages: 3 (250 words per double-spaced page)

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