What Are Financial Ratios and Why Are They Important?
Financial ratios are metrics used to evaluate the financial health of a business. They help entrepreneurs make informed decisions. Some important financial ratios include:
Current Ratio: Measures liquidity by comparing current assets to current liabilities. Debt-to-Equity Ratio: Assesses the financial leverage by comparing total liabilities to shareholders' equity. Gross Margin: Indicates the profitability by comparing gross profit to revenue. Return on Investment (ROI): Evaluates the efficiency of an investment by comparing net profit to the cost of investment.