Financial ratios are numerical values derived from a company's financial statements, used to evaluate its performance and financial health. These ratios help investors, analysts, and managers make informed decisions by comparing different aspects of a company's operations, such as profitability, liquidity, and solvency. Common financial ratios include the current ratio, debt-to-equity ratio, and return on equity. By analyzing these ratios, stakeholders can identify trends over time and benchmark a company against its peers in the industry. This comparative analysis aids in understanding how well a company is managing its resources and whether it is positioned for growth or facing potential challenges.