1. After reviewing all of the ratios, I believe that Profitability Ratios to be the most important ratio because it measures the efficiency in how the business produce income. Gross profit margin is one of three common margin ratios derived from your income statement. However, The Business Owner indicates that it is not only the most important margin ratio but one of the most important financial analysis tools you have. Gross margin is gross profit divided by revenue. The other two common profit margin ratios are operating margin and net margin. These are calculated by dividing operating profit by revenue and net profit by revenue. Operating profit equals gross profit minus fixed costs.

2. My opinion on ratios and which one is most important is the solvency ratio. Liquidity and profitability each sound very important but I feel that solvency is first. When you’re using the solvency ratio you have to think about having the ability to pay back. If your profit is not sufficient enough then how do you provide services and also act as a consumer. If you need a building for the services that you provide how will the loan be paid if there is not enough profit generated. Next I would say liquidity comes next on a scale of importance and last profitability ratios. You could also look at it as profitability, solvency, then liquidity. I think its all in how the company provides a service.100 words each