In the corporate world, financial accounting ratios are of tremendous importance and significance. They can help in the evaluation of a firm's revenue and performance. Vital to the financial statements of a company, that they are, it helps analyze different financial trends and draws a comparison between different firms and their assets. Another major advantage of using financial accounting ratios, is that it is useful for forecast and helps avoid future bankruptcy of a business enterprise. The different financial accounting ratios are:

* Liquidity ratio: This ratio is mostly used to assess short-term liabilities and is especially used for the calculation of finance credit or for lending fund. Two commonly used liquidity ratios are the Quick Ratio and the Current Ratio (or Working Capital Ratio).

* Financial Leverage Ratios: Unlike Liquidity ratios which are used to calculate short-term liabilities and assets, Financial Leverage Ratios are used to calculate the extent and viability of a company's using long-term debt. It provides the long-term credibility of the firm. The Debt ratio and the Debt to Equity ratio are widely used under financial leverage ratios.

* Dividend Policy Ratios: They are used to calculate the prospects of revenue and company growth in the long run. Dividend Yield and Payout Ratio are the two commonly used formulae to calculate Dividend Policy Ratio.

* Profitability Ratios: It is used to calculate the levels of success at different levels of turnover. For example, the "Return on Assets" helps calculate the feasibility of the assets of a company; and the "gross Profit Margin" helps calculate the gross profit earned from the purchasing sales of the produced goods.