Financial Ratio Analysis

What Is Financial Ratio?

A financial ratio is a mathematical expression that compares two specific numerical values from a company’s financial statements. It is an important tool for evaluating a company’s financial health, operational efficiency, and profitability and providing information about its financial status.

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Financial Ratio Analysis

Financial ratio analysis examines numbers from a business’s financial statements to determine its performance, liquidity, leverage, and profitability. This analysis helps investors and analysts understand a business’s financial condition and operational efficiency, guiding investment decisions.

Financial ratio analysis thoroughly examines a company’s financial ratios over time, comparing them to industry averages or competitors’ ratios. This process helps stakeholders identify trends, strengths, weaknesses, and potential areas for improvement or investment.