Key financial ratios provide an insight into the characteristics of an organization’s financial performance. They are calculated by analyzing a business’s financial statements, which provides important clues as to how efficiently the company is operating and its ability to generate profits in the future. The most important indicators of a business’s health include its liquidity, profitability, efficiency, and solvency. In simple terms, these key financial ratios help stakeholders determine whether the business is in good shape or needs improvement. By monitoring them over time, investors can better understand how well the business is doing and identify any early warning signs that may signal trouble ahead.