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1. Liquidity Ratio- provides information about the company’s ability to meet its short-term financial obligations. They are
b. Quick Ratio- it is an alternative that measures the company’s liquidity but it does not include the
inventories.
2. Efficiency Ratio- it indicates how efficiently the firm utilizes its assets. It is sometimes referred as to efficiency ratio.
a. Receivable Turnovers- it indicates how quickly the firm collects its accounts receivable.
b. Average Collection Period- it shows the average day collection of Accounts Receivable.
c. Payables Turnover- this ratio shows how many times in one accounting period the company turns
d. Days Payable Ratio- this ratio shows how many days it takes to pay accounts payable.
3. Financial Leverage Ratio- it provides an indication of the long-term solvency of a company. Unlike the liquidity ratios
that are concerned with short-term assets and liabilities, profitability ratio measure the extent to which the company is
a. Debt to Asset Ratio- measures a company’s financial risk by determining how much of the company’s
b. Debt to Equity Ratio- it indicates what proportion of equity and debt the company is using to finance
its assets.
4. Profitability Ratio- it measures the company’s ability to generate a return on its resources
a. Net Profit Margin- it shows how much net profit is derived from every peso of total sales.
c. Return on Assets- it indicates how efficient the management is in using its assets to generate its
earnings.