Financial ratios indicate a company's financial situation and financial performance. Based on the information provided by these ratios, one may also calculate financial projections, financial trends, offering an image on the companyi¿½i¿½s possible future accomplishments. Based on the results provided by these calculations, companies determine their future strategy. Financial ratios are divided into four main categories that are most frequently used: liquidity ratios, profitability ratios, leverage ratios, and efficiency, activity, and turnover ratios. The following pages will focus on discussing four financial ratios representative for each of these categories. These financial ratios are: Current Ratio, Gross Profit Margin, Debt Ratio, and Receivables Turnover.
             Formula: Current assets i¿½M Current liabilities or
             Inventory + Accounts Receivable + Cash Equivalents + Cash i¿½M
             Accruals + Accounts Payable + Notes Payable
             Current ratio is part of the liquidity ratios category. This ratio indicates the companyi¿½i¿½s liquidity by comparing the companyi¿½i¿½s current assets to its current liabilities (CRF, 1999). In other words, this ratio provides an image on how the company is able to pay its short term obligations. This ratio is sometimes referred to as Working capital ratio or Real ratio, and it is considered to be the most important indicator on the companyi¿½i¿½s financial situation. Specialists consider that the best Current ratio value should be close to 2, but 1.5 is also an acceptable value (Value Based Management, 2007).
             Formula: Sales i¿½C Cost of Goods Sold Sales or Gross Profit Net Sales
             Gross Profit Margin is part of the profitability ratios category. This indicator compares revenue from net sales to the cost involved in producing the companyi¿½i¿½s goods. In other words, Gross Profit Margin indica
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