CFA Level 1: Financial Ratios Explained | Activity, Liquidity, Solvency, and Profitability Ratios

In this video, I break down the four basic families of financial ratios — essential tools for analyzing a company’s financial health and performance. Activity ratios (aka efficiency ratios) measure how efficiently a company uses its assets to generate revenue. Liquidity ratios assess the company’s ability to meet short-term obligations and manage cash flow. Solvency ratios evaluate the company’s readiness to handle long-term obligations and financial stability. Profitability ratios analyze whether the company is effectively generating profits from its operations.

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