Why are ratios used in financial analysis?

RatiOS are used in financial analysis to provide a quick and standardized way to assess a company's performance and financial health. They facilitate comparisons between companies, industries, or time periods by converting complex financial statements into easily interpretable metrics. RatiOS help analysts evaluate aspects such as profitability, liquidity, efficiency, and solvency, enabling informed decision-making for investors, managers, and stakeholders. Ultimately, they serve as essential tools for identifying trends, assessing risks, and making strategic financial choices.