Financial Ratio

A financial ratio is a measure that is used to evaluate the performance and financial health of a company. Financial ratios are calculated by comparing two or more financial metrics, such as revenue, assets, liabilities, and profits, and are used to provide insight into a company's operational and financial performance. Financial ratios are typically expressed in the form of a percentage or a ratio.

Financial ratios are widely used by investors, analysts, and managers to assess a company's financial health and to make informed decisions about investing, lending, or managing a business. There are various types of financial ratios, including liquidity ratios, profitability ratios, efficiency ratios, and leverage ratios.

Liquidity ratios measure a company's ability to meet its short-term obligations, while profitability ratios measure a company's ability to generate profits from its operations. Efficiency ratios measure a company's efficiency in managing its resources, while leverage ratios measure a company's use of debt to finance its operations.

By using financial ratios, investors and analysts can gain a better understanding of a company's financial performance and make more informed investment decisions. However, it is important to remember that financial ratios should be used in conjunction with other factors, such as market trends and company strategy, to make a fully informed investment decision.