What does a current ratio of 3 mean?
The current ratio is a popular metric used across the industry to assess a company’s short-term liquidity with respect to its available assets and pending liabilities.
A ratio over 3 may indicate that the company is not using its current assets efficiently or is not managing its working capital properly..
What are the activity ratios?
An activity ratio is a type of financial metric that indicates how efficiently a company is leveraging the assets on its balance sheet, to generate revenues and cash.
What are the types of ratios?
A few basic types of ratios used in ratio analysis are profitability ratios, debt or leverage ratios, activity ratios or efficiency ratios, liquidity ratios, solvency ratios, earnings ratios, turnover ratios, and market ratios.
What are the 5 types of ratios?
Ratio analysis consists of calculating financial performance using five basic types of ratios: profitability, liquidity, activity, debt, and market.