Ratios are mathematical calculations that the company can use to evaluate its performance. They help the company to determine whether trends are improving or deteriorating. They are calculated by comparing two numbers with each other. The most valuable use of ratios is to compare this year’s ratios with the same ratios for the previous year, and also with the ratios of other companies in a similar business. Ratios also serve as goals for future performance.
Many of us use statistical indicators, many of which are ratios, to monitor the business. These key indicators include: