Summary
Financial Ratios are measurements derived from company financial statements and market data. They help investors evaluate valuation, profitability, growth, liquidity, leverage, and financial health.
Ratios simplify complex financial information into comparable measures.
Why it matters
Financial ratios allow investors to compare companies across time periods, industries, and market conditions. They can help identify strengths, weaknesses, opportunities, and risks.
Ratios are especially useful when used together rather than individually.
How to read it
A single ratio rarely provides a complete picture. For example, a company may appear cheap based on valuation but weak based on profitability or leverage.
Investors should use a combination of ratios to build a balanced view.