Financial ratios are numerical comparisons that help assess a company's performance and financial health. They are calculated using data from a company's financial statements, such as the balance sheet and income statement. Common ratios include the current ratio, which measures liquidity, and the debt-to-equity ratio, which evaluates financial leverage. These ratios provide valuable insights for investors, creditors, and management. By analyzing financial ratios, stakeholders can make informed decisions about investing, lending, or managing a business. Understanding these ratios is essential for evaluating a company's operational efficiency and overall stability in the market.