What is the purpose of ratio analysis?

Ratio analysis serves as a crucial tool for assessing the financial performance and condition of a company. This technique utilizes various financial ratios derived from a company's financial statements to evaluate its operational efficiency, profitability, liquidity, and solvency. Analysts and decision-makers can gain insights into how well a company is managing its resources, its level of debt, and overall financial health.

By comparing these ratios over different periods or against industry benchmarks, stakeholders can make informed decisions regarding investments, credit assessments, and strategic planning. Ratio analysis thus provides a snapshot of a company's financial stability and helps identify trends and areas for improvement.

The other options focus on aspects that are not the primary goal of ratio analysis. For example, forecasting future sales pertains to predictive analytics, while analyzing tax obligations and evaluating customer satisfaction levels require different methodologies and data sets distinct from financial ratio analysis.