List and discuss the four categories of financial ratios that are presented in the chapter

There are four categories of financial ratios discussed in the text: short-term liquidity ratios, activity ratios, profitability ratios, and coverage ratios. Short-term liquidity ratios are indicators of the entity's ability to meet its current obligations when they become due. Activity ratios indicate how effectively the entity's assets are managed. Profitability ratios are indicators of the entity's success or failure for a given period. Coverage ratios provide information on the long-term solvency of the entity, including the ability of the entity to continue as a going concern.