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Tell us three ratios used to judge a company?

Updated: 8/17/2019
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14y ago

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Return on equity, Net Profitability ratio, Acid Test

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Q: Tell us three ratios used to judge a company?
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How is a ratio analsis used in decision?

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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Leverage Financial Ratios Those financial ratios that show the percentage of a company's capital structure that is made up on debt or liabilities owed to external parties Liquidity Financial Ratios Those financial ratios that show the solvency of a company based on its assets versus its liabilities. In other words, it lets you know the resources available for a firm to use in order to pay its bills, keep the lights on, and pay the staff. Operating Financial Ratios These financial ratios show the efficiency of management and a company's operations in utilizing its capital. In the retail industry, this would include metrics such as inventory turnover,accounts receivable turnover, etc. Profitability Financial Ratios These financial ratios measure the return earned on a company's capital and the financial cushion relative to each dollar of sales. A firm that has high gross profit margins, for instance, is going to be much harder to put out of business when the economy turns down than one that has razor-thin margins. Likewise, a company with high returns on capital, even with smaller margins, is going to have a better chance of survival because it is so much more profitable relative to the shareholders' contributed investment. Solvency Financial Ratios These financial ratios tell you the chances of a company going bankrupt. There's really no elegant way to say that. The whole point of calculating them is to make sure that a company isn't in danger of going under anytime soon.


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first of all your question doesnt make sense at all!!! but ill tell you this, Equivalent Ratios are ratios whose fraction or ratio are equivalent. now go away kid


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