## Types of Ratios — The Big Picture
Ratios are grouped by the question they answer. Knowing which family a ratio belongs to tells you whose perspective it serves (short-term creditor, long-term lender, owner, or market investor).
| Family | Also called | What it measures |
|---|---|---|
| Liquidity Ratios | Short-term solvency ratios | Ability to pay short-term liabilities |
| Leverage Ratios | Long-term solvency ratios | Long-term stability & capital structure — split into Capital Structure Ratios and Coverage Ratios |
| Activity Ratios | Efficiency / Performance / Turnover ratios | How efficiently assets are used to generate sales |
| Profitability Ratios | — | Returns; analysed (i) related to sales, (ii) related to overall return on investment (assets / capital employed / equity), and (iii) related to the market (owner's & investor's view) |
### How to read the tree
- Liquidity → short-term lenders and creditors care most.
- Leverage → long-term lenders; capital-structure ratios show the mix of funds, coverage ratios show ability to service fixed claims.
- Activity → management efficiency in using assets.
- Profitability → owners and the market.