Answer :
Financial ratios refer to control mechanisms to test the financial strength of a new venture.
In the field of business, the financial ratio can be described as the standard ratio based upon which the financial strength of a business is estimated. Based on the financial ratio, a new venture by the company is formulated.
Financial ratios act as a standard to test if the company or business is stable enough to start a new venture. The financial ratio helps in getting an insight of the financial condition of a business. No new venture of an organization can be set up before considering the financial ratio as well as the demands of the new venture.
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