Financial ratios Financial ratios are key to success of any business. There are three reasons why we calculate financial ratios. Business ratios are calculated and benchmarked with industry ratios in order to establish the performance of the firm. We also compare the business ratios with the aggregate economy to estimate and understand the performance in changing economic times. In addition, we also compare the ratios with the company’s past performance which enables us to know the trend of the company. The ratios that are commonly calculated by any firm are several.
1. Debt to Equity ratio shows ...