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Financial ratio analysis groups the ratios into categories which tell us about different facets of a company's finances and operations. An overview of some of the categories of ratios is given below.

  • Leverage Ratios which show the extent that debt is used in a company's capital structure.

  • Liquidity Ratios which give a picture of a company's short term financial situation or solvency.

  • Operational Ratios which use turnover measures to show how efficient a company is in its operations and use of assets.

  • Profitability Ratios which use margin analysis and show the return on sales and capital employed.

  • Solvency Ratios which give a picture of a company's ability to generate cashflow and pay it financial obligations.

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