Final answer:
Efficiency ratios measure the effectiveness of managers in creating profits. Liquidity ratios measure a company's ability to meet short-term obligations. Profitability ratios assess a company's ability to generate profits.
Step-by-step explanation:
Efficiency ratios, such as inventory turnover, measure the effectiveness of managers in the basic function of creating profits.
Liquidity ratios, on the other hand, measure a company's ability to meet its short-term obligations. Examples of liquidity ratios include the current ratio and the quick ratio.
Profitability ratios, like the gross profit margin and net profit margin, assess a company's ability to generate profits relative to its revenue and expenses.