Financial ratios are quantitative tools used to evaluate a company’s financial performance and health. They derive by comparing specific financial statement figures, offering insights into aspects like profitability, liquidity, efficiency, and solvency. Common ratios include the current ratio, return on equity, and debt-to-equity ratio. By analyzing these metrics, investors, managers, and stakeholders can assess operational efficiency, financial stability, and potential growth, aiding in informed decision-making processes.