Evaluating Business Performance Using Financial Ratios

Ratio analysis meaning refers to the interpretation of financial statements by examining relationships between different financial figures. It is used to assess a company’s profitability, liquidity, efficiency, and solvency. By converting raw financial data into ratios, stakeholders can easily compare performance across time periods, companies, and industries. Commonly used ratios include current ratio, net profit ratio, return on equity, and debt-equity ratio. This analysis supports informed decision-making for managers, investors, and creditors by highlighting financial strengths, weaknesses, and potential risks. The Algebra Group focuses on simplifying such analytical concepts for practical business understanding.