Financial ratios

          Financial ratios are relationships between different accounts from financial statements—usually the income statement and the balance sheet—that serve as performance indicators. Being relative values, financial ratios allow for meaningful comparisons across time, between competitors, and with industry averages. Five key areas of a firm’s performance can be analyzed using the following financial ratios: Liquidity ratios Solvency ratios Asset management ratios Profitability ratios Market value ratios What does each ratio do for a business?