• Accounting ratios, an important subset of financial ratios, are a group of metrics used to measure a company’s performance and profitability based on its financial statements.

  • Accounting ratio compares two line items in a company’s financial statements, namely those compiled from the income statement, balance sheet, and cash flow statement.
  • These ratios can be used to assess the company’s key performance indicators and provide information on the company’s performance for the last quarter or financial year.
  • General accounting ratios include debt-to-equity ratio, quick liquidity ratio, dividend payout ratio, gross profit and operating profit.
  • Accounting ratios are used both by the company itself to improve or track progress, and by investors to determine the best investment option.