Importance of ratios

Ratio analysis is the best mean to analyse financial statements. They are indicators of performance of a company in quantitative terms. For example, GP margin is used to analyse how efficiently the company is using its raw material, labour etc in generating profits. In form 3CD, it has indirect control of wrong valuation of closing stock not being done since it will have significant change in GP ratio when compared to the previous year. Similarly, every ratio has its own significance.