financial ratios be used to assess a companies performance
                     How can financial ratios be used to assess a companies 
performance? 
Financial analysis is regarded as one of the essential tools in business and a foundation 
for planning and control. Financial ratio analysis is a fundamental tool for analyzing a 
project's financial position in light of the figures and data in its financial statements. It is 
used by investment firms, banks, and knowledgeable business owners to learn more 
about a company's current financial health, potential, and challenges. In general, small 
and medium-sized businesses struggle to analyze and improve financial ratios. In the 
end, it's all about data, insights, and analysis. After performing due diligence, which 
entails a thorough investigation of the borrower's background and financial history, 
financial institutions assign a credit score to them. They use various ratios in credit 
analysis, and the choice is based on the borrower's objectives and the projects in which 
they intend to invest capital. Qualitative and quantitative methods are used in the credit 
analysis process. The quantitative analysis relies heavily on lending ratios.  
  
 
Ratios are used to assess a company's operational efficiency, liquidity, stability, and 
profitability, and they provide more useful information to investors than raw financial 
data. The widely popular and arguably indispensable ratio analysis technique can help 
investors and analysts gain good advantages in the stock market. Comparing raw 
financial data from two companies in the same industry yields only a limited amount of 
information. Ratios reveal a company's ability to make a profit, fund the business, grow 
through sales rather than debt, and a variety of other factors and numbers.  
  
Financial ratio analysis can be used to assess a company's performance and strategize 
action plans. Businesses can use them to compare their company's current 
performance to previous periods and identify existing and potential issues that need to 
be addressed.  They can also use these ratios to compare their company's performance 
to that of their competitors or other industry members. A lender might use financial 
ratios to assess the stability and health of your business by looking at your balance 
sheet, which shows what your company owns or owes (assets) and what it owes (debts) 
(liabilities). They are frequently included in business loan agreements as well.  
  
 Businesses should not only use financial ratios when visiting a bank; they should also 
use them to assess their performance and forecast prospects. Even though different 
ratios have different names, they fall into four categories.  
 
 
1)   Liquidity Ratios  
2)   Efficiency ratios  
3)   Profitability ratios  
4)   Leverage ratios  
 
 
Supply chain finance has recently been scrutinized more closely, both in terms of 
financial reporting and the implications for investors. Financial analysis has become 
more important in recent decades due to several factors, including increased 
competition between different economic projects and the growing role of financial 
markets. The financial ratios were broken down into several totals, each reflecting a 
different aspect of the project. Some reflect the enterprise's liquidity position, particularly 
the ability to incur long-term liabilities. In contrast, others reflect the efficiency of 
managing current and fixed conditions, which measures the project's degree of 
indebtedness and borrowing capacity.