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A financial ratio analysis is another comparison tool that can show how a business is performing over time compared to another business in the same industry. They are also useful for determining the businesses liquidity, efficiency, and profitability. A liquidity ratio is a company's ability to pay off its current short term debts and can be found by dividing the company's current assets by current liabilities. Leverage ratios describe the company's ability to meet/pay its financial obligations or debts and thats found by dividing the debt by equity. Activity ratios are a metric that describes how efficient a company is at turning its assets into revenue. Profitability ratios are usually described as profit margins and indicate how well a company can generate profit from its operations. The growth ratios show how fast a company is growing, typically a good growth ratio is considered to be above 10% per year. From these ratios | think that the profitability ratio is the most important to consider when making financial decisions. By knowing the profitability ratio, a company can determine to spend more money on advertising if profitable, expand into new markets, or even cut back on spending if needed according to their profitability