Summary

Liquidity Ratios measure short-term solvency. Current Ratio = Current Assets / Current Liabilities (ideal 2:1). Quick Ratio = Quick Assets / Current Liabilities (ideal 1:1), where Quick Assets = Current Assets − Inventory − Prepaid Expenses.

Solvency Ratios assess long-term financial stability. Debt-Equity Ratio = Long-term Debt / Shareholders' Funds (safe < 2:1). Total Assets to Debt Ratio = Total Assets / Long-term Debt. Interest Coverage Ratio = EBIT / Interest (higher is safer).

Activity (Turnover) Ratios evaluate operational efficiency. Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory. Trade Receivables Turnover Ratio = Net Credit Revenue from Operations / Average Trade Receivables. Trade Payables Turnover Ratio = Net Credit Purchases / Average Trade Payables. Working Capital Turnover Ratio = Revenue from Operations / Working Capital. …