Zoho Bookings & SalesIQ Alignment

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Financial Ratio

Meaning: 

A financial ratio is defined as a numerical comparison between two financial values that helps measure a company’s performance, stability, efficiency, or profitability. Ratios are derived from financial statements like the balance sheet, income statement, and cash flow statement.

Example:

For instance, if a company has ₹2,00,000 in profits and ₹10,00,000 in sales, its net profit margin ratio would be 20%, indicating how much profit it makes from its sales.

How to understand Financial Ratio:

Financial ratios help investors assess a company’s financial health and performance. 
They allow for comparisons with competitors and industry standards.


Importance of Financial Ratio:   

Ratios can show strengths and weaknesses in profitability, debt levels, cash flow, and efficiency.
They assist management in making informed business decisions.


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