What are financial ratios, and how are they used in analysis?
Financial ratios are quantitative metrics that assess a company's financial performance and condition. They compare different financial elements, such as profitability, liquidity, solvency, and efficiency, by relating them to one another. Financial ratios provide insights into the company's financial health, help identify strengths and weaknesses, and enable comparisons with industry benchmarks or historical performance. Investors, lenders, and analysts can make informed decisions about the company's financial prospects and risks by analyzing these ratios.