A financial ratio is a numerical comparison between two or more figures from a company\'s financial statements, used to assess its performance, health, and position. These ratios simplify complex financial data into understandable metrics that help analyze profitability, liquidity, leverage, and efficiency, enabling better decision-making for investors, managers, and analysts. What financial ratios do Analyze performance: Ratios provide insights into how well a company is performing by evaluating metrics like profit generation and asset use. Measure financial health: They reveal a company\'s ability to meet its short-term and long-term financial obligations. Facilitate comparison: Ratios make it easier to compare a company\'s performance over time or against other companies in the same industry, even of different sizes. Identify potential risks: They can serve as red flags, indicating potential issues with a company\'s financial stability or operations.