What are financial ratios used for?

Financial ratios are critical tools used primarily to evaluate a company's financial performance. They provide insights into various aspects of a company's operations, including profitability, efficiency, liquidity, and solvency. Investors, analysts, and management use these ratios to make informed decisions regarding investments, creditworthiness, and operational improvements.

For instance, ratios such as the current ratio, debt-to-equity ratio, and return on equity offer a comprehensive view of how well a company is managing its assets and liabilities, how it compares to industry standards, and how effectively it generates profits from its investments. This analysis can reveal strengths and weaknesses, helping stakeholders make strategic decisions.

While the other options mention valid activities within personal finance and investment analysis, they do not accurately capture the primary role of financial ratios in assessing a company's financial health and performance.