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Why doesn't AccountingCoach.com classify the financial ratios?

Author:
Harold Averkamp, CPA, MBA

We avoided classifying the financial ratios because a financial ratio may overlap several classifications, and there are several different titles for the classifications.

Let’s use the inventory turnover ratio as an example. During our review of several books and articles we found the inventory turnover ratio in a variety of ratio classifications including liquidity, solvency, activity, asset management, asset utilization, efficiency, and short-term creditor.

Even the current ratio was listed as a liquidity ratio, a solvency ratio, a short-term solvency ratio, and a short-term creditor ratio.

Rather than add to any confusion, we chose to downplay the ratio classifications.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

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