Turnover ratios show how efficiently assets or other items have been used to generate· revenue from operation. They are also called as activity ratio or efficiency ratios. They show to speed of movement of various items. They are expressed as 'number of times in relation to the item compared.

Proprietary ratio gives the proportion of share holders' funds to totaLassets. Proprietary ratio slows the extent to which, the total assets have been financed by the.share holders funds
\(\text { Proprietary Ratio }=\frac{\text { Share holders Funds }}{\text { Total Assets }}\)

Long term soivency means the firm's ability to meet its liabilities· in the long run. It helps to determine the ability of the business to repay its debts in the long run. They are normally computed for evaluating long-term Solvency of the business.

It means capability of being converted into Cash. Liquidity ratios help to access the ability of a business concern, to meet its short term financial obligations. It includes
(i) Current ratio
(ii) Quick ratio

Functional Classification of ratio is based on the purpose for which ratios are computed and it is the most commonly used Classifications. the ratios are classified as.
(i) Liquidity ratio
(ii) long term solvency ratio
(iii) Turnover ratio
(iv) Profitability ratios

(i) Selling price· may have increased without the same increase in the price of materials and wages.
(ii) Gross profit may be hi

Profitability ratios measure the overall effectiveness of the management. These ratios are based either on revenue operations or on investments. It includes.
(i) Gross Profit Ratio
(ii) Net Profit Ratio
(iii) Operating Ratio

Solvency ratios show the long - term financial solvency and measure the enterprises ability to pay interest and long - term liability at maturity. They include:
(i)  Debt to Equity Ratio
(ii) Proprietary Ratio
(iii) Total assets to debt Ratio

Yes, it is true that the liquidity of a business firm is measured by its ability to pay its long-term obligations as they become due. Here, the longterm obligation means payment of principal amount on the due date and payment of interest on the regular basis.
For measuring the long term solvency of any business, we calculate the following ratio.
(i) Debt equity ratio
(ii) Proprietary ratio

(i) Nature of a business makes inventory turnover ratio more important in case of a grocery store as compare to an insurance company.
(ii) A grocery store is a trading concern involved in trading. On the other hand, insurance company is involved in service business and involved in delivering service, so there is no question of inventory because service is perishable in nature and cannot be stored.

(i) Inventory turnover ratio is a relationship between the cost of goods sold during a particular period of time and the cost of average inventory during a particular period. It is expressed in number of times.
(ii) Inventory turnover ratio indicates the number of times, the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory.

Accounting ratio are calculated from financial statements which are drawn on the basis of historical costs as recorded in the books of accounts. Thus. these ratios ignore the change in price level and they do not reflect the actual analysis.

High total assets to debt ratio indicates that assets have been mainly financed by owner's funds and the long-term debt is adequately covered by assets.

Current ratio gives the proportion of current assets to current liabilities of a business concern. It is computed by dividing current assets by current liabilities. It is calculated as follows:
Current ratio = \(\frac{Current assets}{Current liabilities}\).

According to Myers, "Ratio analysis is a study of relationship among various financial factors in a business':