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Financial data by itself may not give the complete picture about a company's performance and financial well being. It is difficult to evaluate standalone numbers without comparing them to certain norms and standards. Ratios provide a set of standardised parameters which can be compared across companies. Ratios of a company can be evaluated against industry benchmarks to know the relative position of that company against its peers.
There are various types of ratios depending on the nature of analysis required. Some ratios measure the operational strengths of a company while others measure the financial strength, valuation etc of the company.

Profitability ratios
Gross profit to sales
This ratio presents the gross profit as a percentage of total operating revenues of the company. Gross profit is arrived at by deducting cost of sales from revenues in the case of manufacturing and trading companies. In the case of a service company, the costs incurred for rendering the services......

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Approximate Word Count: 1802
Approximate Pages: 8 (250 words per double-spaced page)

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