What financial statements are required to calculate financial ratios?

The correct choice involves the income statement and balance sheet because these two financial statements provide the necessary data to calculate a wide array of financial ratios that assess a company's performance and financial health.

The income statement reflects a company's revenues, expenses, and profits or losses over a period, which is essential for calculating profitability ratios such as net profit margin and return on equity. On the other hand, the balance sheet offers a snapshot of a company's assets, liabilities, and equity at a specific point in time, enabling the calculation of liquidity and leverage ratios such as the current ratio and debt-to-equity ratio.

Together, these two statements allow for a comprehensive analysis of a company’s operational efficiency, capital structure, and overall financial status, which are crucial for investors, creditors, and stakeholders in making informed decisions.