Ratio Analysis – Classification of Ratios and Liquidity Ratio

It is but natural to proceed another step forward after completing on step, which is why now we will understand the classification of ratios analysis and discuss Liquidity ratio. Accounting ratio indicates the financial position of a firm, and the classification of the ratio also depends on the [party using it. The three broad classifications are based on Balance Sheet, basis of Profit and Loss Account, and basis of Mixed Statement. These classifications are then grouped into three types of ratio—Liquidity, Profitability, Turnover, and Solvency. To help you better, here is a chart: