categories of ratios

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.

financial analysis

I am reading about the financial analysis this afternoon because we will be having a recitation this coming Wednesday. Financial Analysis is an in depth review or study of the basic financial statements. It is connected with balance sheet that shows the position of the business and Income statement that shows the result of the operation. In financial analysis, the ratios are interpreted. These ratios are tools that are used in analyzing financial statement. There are two types of ratio comparison, the time series analysis and the cross sectional analysis. The time series analysis is the comparison of a single firm for two consecutive years while the cross sectional analysis is the comparison of two or more firms for financial ratios at the same point in time.