From the three financial statements, we can calculate financial ratios and draw implication on the profitability, liquidity, stability and overall operational performance of the business.

Ratios used in isolation are rarely useful, but on the other hand, some ratios are strongly correlated with each other, so ideally a small, but meaningful number of ratios should be calculated for performance analysis. Financial ratios are used by the management, shareholders, debt holders and financial analysts to estimate business performance, highlight areas of concern and benchmark the current situation with past historical performance and with other companies on the market. Benchmarking can be challenging as the accounting methods used can change over time for one company, but also not remain consistent across a peer group of comparable companies within one country or across countries, so that considerable care is required here.