Common Ratios in Financial Analysis
Financial analysts use many ratios while analyzing a company. Since there are many ratios, it becomes easy to categorize them under broad categories. The following table lists the categories and the key ratios within each category.
Category  Description  Key ratios 
Activity ratios  Activity ratios measure how effectively a business uses its resources, such as receivables collection, inventory, etc. Also called efficiency ratios 

Liquidity ratios  Liquidity ratios measure a business’s ability to meet its debt obligation in the shortterm 

Solvency ratios  Solvency ratios measure a business’s ability to meet its obligations in the longterm. Also called leverage ratios.  Debt Ratios

Profitability ratios  Profitability ratios measure how profitable a company is.  Return on Sales

Valuation ratios  These ratios measure the value of a company. 

An analyst uses a combination of these ratios to analyze various aspects of a business. We will look at all these ratios in the following articles.
LESSONS
 Common Ratios in Financial Analysis
 Inventory Turnover and Days of Inventory on Hand (DOH)
 Receivables Turnover and Days of Sales Outstanding (DSO)
 Payables Turnover and Number of Days of Payables
 Working Capital Turnover Ratio
 Fixed Asset and Total Asset Turnover Ratio
 Activity Ratios – Video Summary
 Liquidity Ratios (Current Ratio, Quick Ratio, and Others)
 Cash Conversion Cycle (CCC)
 Solvency Ratios
 Profitability Ratios
 DuPont Analysis
 Valuation Ratios
 Financial Ratios: Uses and Limitations
R Programming Bundle: 25% OFF
Get our R Programming  Data Science for Finance Bundle for just $29 $39.
Get it now for just $29