Financial ratios compare values drawn from financial statements as a means of judging business performance.  This process is called ratio analysis and is used by accountants, managers and investors.  Ratios can be used to examine a company's performance over time or to compare a company to others in the same industry. 

Numerous ratios are in common usage and calculation formulas are found in textbooks and reference resources in print or online.

Industry norms are averages of the ratios for companies in the same industry and often organized by NAICS or SIC.

Financial ratios can be used to judge corporate performance, develop business plans, identify credit risks, and to create investment strategies.

Answered by (629) on Mar 02, 2010Email answer