A ratio is one value expressed to another. A financial ratio is one financial value or measurement expressed to another. There are about 20 financial ratios commonly used to assess one company's performance compared to another company in the same industry, or to itself over time.

1) Why or why not do you consider it sound business practice to make financial decisions based solely on the results of calculating financial ratios, for instance, whether to invest in a company or loan money to it?

2) Is it possible that a "good" financial ratio might be artificially caused by another ratio which is "bad"? ":I need a logical and conceptual answer rather than a hypothetical one". Thanks in advance for your help.

"I need a logical and conceptual answer which alligns with the financial management principles rather than an answer which is hypothetical."

Thanks in advance.