Ratio is the relationship between two financial variable. It is expressed as one figure divided by another.
Types of ratio analysis. There are four major Types of Ratio Analysis
- Liquidity ratio
- solvency ratio /debt management ratio / leverage ratio
- Turn over ratio /Activity ratio /Efficiency ratio
- Profitability ratio
- Current ratio = current assets/current liabilities.
- Quick ratio /liquid ratio /Acid test ratio = Quick assets/current liabilities