Accounting ratios are a group of metrics used to measure the efficiency and profitability of a company based on its financial reports.
An accounting ratio compares two line items in a company’s financial statements that are made up of its income statement, balance sheet, and cash flow statement.
These ratios can be used to evaluate a company’s fundamentals and provide information about the performance of the company over the last quarter or fiscal year.
Common accounting ratios include the debt-to-equity ratio, the quick ratio, the dividend payout ratio, the gross margin, and the operating margin.
Accounting ratios are used by the company to make improvements or monitor progress as well as by investors to determine their best investment options.
