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Answer Posted / ruchi
Ratio are as follows
Liquidity Ratios:
Liquidity Ratios are ratios that come off the the Balance
Sheet and hence measure the liquidity of the company as on
a particular day i.e the day that the Balance Sheet was
prepared. These ratios are important in measuring the
ability of a company to meet both its short term and long
term obligations.
Efficiency Ratios:
Efficiency ratios are ratios that come off the the Balance
Sheet and the Income Statement and therefore incorporate
one dynamic statement, the income statement and one static
statement , the balance sheet. These ratios are important
in measuring the efficiency of a company in either turning
their inventory, sales, assets, accounts receivables or
payables. It also ties into the ability of a company to
meet both its short term and long term obligations. This is
because if they do not get paid on time how will you get
paid paid on time. You may have perhaps heard the excuse 'I
will pay you when I get paid' or 'My customers have not
paid me!
Inventory Turnover ratio:
Accounts Payable to Sales
Profitability Ratios show how successul a company is in
terms of generating returns or profits on the Investment
that it has made in the business. If a business is Liquid
and Efficient it should also be Profitable.
Return on Sales or Profit Margin (%)
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