What are financial ratios used for?

Financial ratios are essential metrics used to evaluate the financial performance of a company. They provide a quantitative analysis of different aspects of a business's operations, such as profitability, liquidity, efficiency, and solvency. By analyzing these ratios, stakeholders—including investors, creditors, and management—can gain insights into how well a company is performing financially and how it compares to industry standards or historical performance.

For instance, common financial ratios like the current ratio can help assess a company's ability to meet its short-term obligations, while return on equity (ROE) can indicate how efficiently a company generates profits from its shareholders' investments. This ability to distill complex financial data into understandable metrics makes financial ratios invaluable for informed decision-making.

The other options do not accurately describe the primary purpose of financial ratios. While they are critical in their respective areas—employee productivity, auditing, and customer satisfaction—they operate outside the scope of financial ratios' intended use in evaluating a company's financial performance.