There are five different categories of ratios that provide a lot of insight about how healthy an organization is.

Liquidity ratios look at whether an organization has enough money to pay its bills. Some of the common liquidity ratios are the current ratio, the quick ratio, and the networking capital ratio.

Profitability ratios look at whether a company is making more money than it’s spending. The most common profitability ratios are profit margin and return on equity.

Capital structure ratios look at how much debt the company has. The two main capital structure ratios are debt to equity and debt to assets.

Market value ratios show how the company is performing for investors. These are mostly used for companies that are publicly traded on a stock exchange. Some common market value ratios are the price-to-earnings ratio and the dividend yield.

Finally, activity analysis ratios look at how efficiently the organization is using the money it has. These ratios include inventory turnover ratio, or turns, and the asset turnover ratio. Activity analysis ratios are very useful for understanding whether operational improvements are creating financial benefits.