Managers rely on financial ratio analysis when making decisions. What are the four key ratios? What information does each provide?
I have answered your question through a discussion of the 4 groups of ratios. While each group may have more than one ratio, I have also discussed one ratio from each group.
There are 4 groups of Financial Ratios as follows:
The most common liquidity ratio is the current ratio, which is the ratio of current assets to current liabilities. This ratio indicates a company's ability to pay its short-term bills. A ratio of greater than one is usually a minimum because anything less than one means the company has more liabilities than assets. A high ratio indicates more of a safety cushion, which increases flexibility because some of ...
Definition of the four key financial ratios: Liquidity, Solvency, Profitability and Efficiency, with sources of information.