Accounting ratios assist in the interpretation of financial performance of an entity. Information such as business solvency, its profitability, the return on its assets, its ability to meet short-term and long-term liabilities et cetra, is vital in gauging a business' health and its commercial vialbility. Such information is vital for all the stakeholders, that is shareholders, potential investors, the management, creditors, guarantors and statutory/regulatory bodies.
Financial statement analysis / accounting ratios can be divided in the following categories:
(click on a category to see ratios under it along with their formulas)