There are four categories of ratios. The liquidity ratio, profitability ratio, activity ratio and the debt ratio. According to Lawrence Gitman, liquidity ratio is a firm’s ability to satisfy its short term obligations as they fall due. Activity ratios measure the speed with which various accounts are converted into sales or cash inflows or outflows. Profitability ratios enable analysts to evaluate the firm’s profits with respect to a given level of sales, a certain level of assets or the owners’ investment. Hmmm, that is all for today! I hope you learned from my articles.