Classification of Ratio

 Classification of Ratio

Classification of Ratio

 Ratios are classified according to the need of different interested groups (e.g., shareholders, lenders, investors, management, etc.).

Ratio-: (1) Liquidity Ratio; (2) Solvency Ratio; (3) Activity Ratio; (4) Profitability Ratio.

(1) Liquidity Ratio-: (a) Current Ratio; (b) Liquid Ratio / Quick Ratio / Acid Test Ratio.

(2) Solvency Ratio-: (a) Debt-Equity Ratio; (b) Total Assets to Debt Ratio; (c) Proprietary Ratio; (d) Interest Coverage Ratio.

(3) Activity Ratio-: (a) Inventory Turnover Ratio / Stock Turnover Ratio; (b) Debtors Turnover Ratio; (c) Payable Turnover Ratio / Creditors Turnover Ratio; (d) Working Capital Turnover Ratio.

(4) Profitability Ratio-: (a) Gross Profit Ratio; (b) Net Profit Ratio; (c) Operating Ratio; (d) Operating Profit Ratio.