In analyzing a Company, we can also compute its gross profit ratio and return on sales. Gross profit ratio is computed by dividing gross profit with sales and return on sales is computed by dividing net income by sales. Respectively, 2006 and 2005 ratios of ABC Company are as follows: 39% and 38% in gross profit; and 16% and 15% in return on sales.

Other quantitative measurement of its liquidity is going into detailed of each current assets account using working capital activity ratios. This provides information about the time within which ABC Company should realize cash from its receivables and inventories. and, although we cannot tell the time within which the Company must pay its various current liabilities by examining the financial statements, we can use ratio to offer us some insight into the company's bill paying practices or how long customers pay their account.

Working capital ratios are...
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