Accounting Ratios FAQs What are Accounting Ratios? Accounting Ratios are indicators of a company’s financial health, including profitability and liquidity. Accounting ratios are also used to spot companies in potential financial distress. What is a Debt Ratio? Debt ratios measure the debt of a company relative to various other figures and a company’s long-term ability to pay off its debt obligations. What are Liquidity Ratios? Liquidity ratios calculate a company’s indebtedness in regard to measuring the liquidity or ability to service short-term debt. What are Profitability Ratios? Profitability Ratios measure a company’s ability to generate profits from its overall revenue figures by considering expenses or equity. Examples are Earnings Per Share (EPS), Return on Equity (ROE), and Gross Margin. How are Accounting Ratios used? Accounting Ratios provide a window into the company’s operations and priorities. For example, debt ratios can indicate whether the company can avoid bankruptcy due to a business disruption. Profitability ratios are used to calculate the company’s actual profits. About the Author True Tamplin, BSc, CEPF® Facebook Linkedin Instagram Twitter Youtube True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.