Fundamental analysis typically groups financial ratios into these categories:
**1. Liquidity ratios** — ability to meet short-term obligations
- Current ratio, quick ratio, cash ratio
**2. Solvency/leverage ratios** — long-term debt capacity and financial risk
- Debt-to-equity, debt-to-assets, interest coverage ratio
**3. Profitability ratios** — earnings performance
- Gross margin, operating margin, net margin, ROE, ROA, ROIC
**4. Efficiency (activity) ratios** — how well assets are used
- Inventory turnover, receivables turnover, asset turnover, days sales outstanding
**5. Valuation (market) ratios** — how the market prices the stock relative to fundamentals
- P/E, P/B, P/S, EV/EBITDA, dividend yield, PEG ratio
**6. Growth ratios** — trends over time
- Revenue growth, EPS growth, earnings growth rate
**7. Cash flow ratios** — quality of earnings and cash generation
- Operating cash flow ratio, free cash flow yield, cash flow to debt
Analysts usually combine several of these groups rather than looking at one in isolation — for example, pairing profitability with leverage to see if high returns are coming from excessive debt, or checking valuation against growth to judge if a stock is fairly priced. Want me to go deeper on any one group, or walk through how to apply these to a specific company?