Stock turnover is an activity ratio. It measures how efficiently a company sells its inventory. A higher stock turnover ratio indicates that a company is selling its inventory more quickly, which can be a sign of good management. A lower stock turnover ratio indicates that a company is holding onto its inventory for longer, which can be a sign of poor management or a lack of demand for its products.
Profitability ratios measure how profitable a company is. They compare a company’s net income to its revenue, assets, or equity. Profitability ratios can be used to compare companies in the same industry or to track a company’s profitability over time.
Leverage ratios measure a company’s financial risk. They compare a company’s debt to its equity. Leverage ratios can be used to assess a company’s ability to repay its debt and to determine its financial stability.
Liquidity ratios measure a company’s ability to meet its short-term obligations. They compare a company’s current assets to its current liabilities. Liquidity ratios can be used to assess a company’s financial health and to determine its ability to pay its bills on time.