What are the main objectives of ratio analysis?

The primary objective of ratio analysis is to track company performance and identify areas of concern. Ratio analysis involves evaluating financial statements through calculated ratios that assess various aspects of a company’s financial health, such as profitability, liquidity, efficiency, and solvency. By systematically analyzing these ratios, stakeholders can gain insights into how well a company is operating and pinpoint specific areas that may require improvement or pose risks.

This approach helps managers, investors, and analysts make informed decisions based on the company’s financial reality. They can conduct comparisons over time or against industry benchmarks to reveal trends and underlying issues that could affect the business's overall performance.

While other options may touch on relevant aspects of business operations, such as employee productivity or market trends, they do not represent the core objectives of ratio analysis specifically. Ratio analysis is tightly focused on financial metrics and performance indicators rather than broader operational or market-related assessments.