Ratio Analysis
Ratio analysis is a quantitative method used to evaluate the financial performance, efficiency, and health of a business by calculating and comparing various financial ratios derived from accounting statements like the balance sheet and income statement. It involves analyzing relationships between different financial metrics to assess profitability, liquidity, solvency, and operational efficiency. This technique is widely applied in finance, accounting, and business management to support decision-making, benchmarking, and forecasting.
Developers should learn ratio analysis when working on financial software, fintech applications, or data analytics projects that involve financial data processing, as it enables them to build tools for automated financial reporting, risk assessment, and investment analysis. It is particularly useful in roles requiring integration with accounting systems, development of dashboards for business intelligence, or implementation of algorithms for credit scoring and financial modeling, helping to translate raw data into actionable insights.