What Is Ratio Analysis, and why can it be important?

By studying a company's financial statements like income statements or balance sheets, you can gain insight into a company's profitability or operational efficiency. This method is called ratio analysis. Ratio analysis can show the performance of the company over time, and compare it to other companies within the same sector. Thus, it is important as it can help shareholders or investors of the company in decision making.

What Is Ratio Analysis, and why can it be important?