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FINANCIAL RATIO
Types Of Financial Ratio
Liquidity ratios
Efficiency ratios
Leverage ratios
Profitability ratios
Market ratios
1. LIQUIDITY RATIO - Shows a firm’s ability to
meet its short term financial obligation.
Types of ratio Definition Formula Indicator
Company has the
a. Current ratio resources to pay its the higher
creditor when liquidity the
payments are due easier it is
↑ for the
Unit = 1 company to
pay its
creditor on
time
Indicates whether a
b. Quick ratio firm has enough −
−
current asset to
cover its current its
liabilities without Unit = 1
selling inventory
