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are useful indicators of a company's performance and financial status
can be calculated using information provided in a company's financial statements (e.g., balance sheet, income statement, etc.)
measure various aspects of a business operation such as ...
profitability (e.g., return on sales ratio)
liquidity (e.g., current ratio)
efficiency (e.g., inventory turnover ratio)
effectiveness (e.g., return on investment ratio)
solvency or financial strength (e.g., debt to equity ratio)
can be used to identify a company's strengths and weaknesses relative to its competitors
can be used to benchmark a company's financial performance against the industry averages or norms in which it operates
are often included as part of a business plan or loan agreement
More on Ratios
For more information on financial ratios, try searching McMaster's libary catalogue to find books that discuss and explain how to calculate, use and interpret financial ratios. Some possible searches include: