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
Coverage Ratios

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

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.
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