Ratio Analysis is a financial tool used to evaluate a company's performance and financial health by comparing different figures from its financial statements. It involves calculating various ratios, such as liquidity ratios, profitability ratios, and debt ratios, which help stakeholders understand how well a company is managing its resources and obligations. These ratios provide insights into areas like operational efficiency, solvency, and return on investment. By analyzing these metrics, investors, creditors, and management can make informed decisions regarding investments, lending, and strategic planning, ultimately contributing to better financial management and growth.