This classification is based on the purpose for which an analyst computes these ratios. For easy understanding and to achieve the purpose of ratios effectively, ratios may be classified as:- 1. Profitability Ratios 2. Coverage Ratios 3. Turnover Ratios/Activity Ratio 4. Financial Ratios/Liquidity Ratio 5. Leverage Ratios/Long-Term Solvency Ratios. These are discussed one by one below: 1. Profitability Ratios: The [...]
In this article we will discuss about the standard of comparison of ratios and projection of future through ratios. Standard of Comparison: The ratio analysis involves comparison for useful interpretation of the financial statements. Interpretation of financial statements of a firm with the help of ratios becomes significant and meaningful. The ratios should be compared with some standard ratios. When [...]
In this article we will discuss about the classification of balance sheet ratios. They are:- 1. Current Ratio 2. Net Working Capital Ratio 3. Quick Ratio 4. Cash Position Ratio 5. Proprietary Ratio 6. Capital Gearing Ratio 7. Debt Equity Ratio 8. Reserves to Equity Share Capital Ratio 9. Solvency Ratio 10. Security Ratio. 1. Current Ratio: Current Ratio is [...]