Definition: Liquidity ratios measure a company's ability to meet its short-term obligations and cover immediate financial needs without raising external capital.
Usefulness: These ratios help assess the company's short-term financial health and its ability to handle immediate financial challenges.
Definition: Profitability ratios evaluate a company's ability to generate profit in relation to its revenue, assets, equity, and other financial metrics.
Usefulness: These ratios provide insights into the overall financial performance and effectiveness of a company in generating profit.
Definition: Efficiency ratios measure how well a company utilizes its assets and resources to generate sales and income.
Usefulness: These ratios indicate how effectively a company is managing its resources, including inventory, assets, and receivables.
Definition: Solvency ratios assess a company's long-term financial health by evaluating its ability to meet long-term obligations and sustain operations over an extended period.
Usefulness: These ratios help determine the financial stability and long-term viability of a company.