---
title: Business Dictionary - Financial Ratio
description: "Financial Ratio - A mathematical comparison of two or more financial statement items to assess a company's financial health. "
url: https://view.ge/en/business-glossary/financial-ratio-en
---

# Financial Ratio

### Glossaries

| Term | Definition |
| --- | --- |
| Financial Ratio | A mathematical comparison of two or more financial statement items to assess a company's financial health.  A financial ratio is a mathematical comparison of two or more items from a company's financial statements that express a specific relationship. These ratios are used to assess a company's financial performance, liquidity, solvency, profitability, and efficiency. Here are the different types of financial ratios and what they measure: Liquidity ratios: Current ratio: Measures a company's ability to pay its short-term liabilities with its short-term assetsQuick ratio: Measures a company's ability to pay its short-term liabilities with its most liquid assets (cash, marketable securities, and accounts receivable).Cash ratio: Measures the portion of a company's current liabilities that can be covered by its cash and cash equivalents.Solvency ratios: Debt-to-equity ratio: Measures a company's ability to meet its long-term financial obligations by comparing its total debt to its total equity. Debt-to-capital ratio: Measures the proportion of a company's capital that is financed by debt.Profitability ratios: Profit margin: Measures a company's profitability as a percentage of its revenueReturn on equity (ROE): Measures how much profit a company generates for each dollar of shareholder equity.Return on assets (ROA): Measures how much profit a company generates for each dollar of total assets.Inventory turnover ratio: Measures how many times a company sells and replaces its inventory over a period of time. Receivables turnover ratio: Measures how many times a company collects its receivables over a period of time.Payables turnover ratio: Measures how many times a company pays its suppliers over a period of time.   |