users. It equips them with the knowledge to assess a company's financial health and make informed decisions. The current ratio, debt$-$to$-$equity ratio, and return on equity $($ROE$)$ are three such ratios that play a pivotal role in this process.

The current ratio, a liquidity ratio calculated as current assets divided by current liabilities, is a practical tool for assessing a company's ability to meet short$-$term obligations $($Brigham & Ehrhardt, $2022).$ For internal users like managers, it's a way to ensure the company has enough working capital for day$-$to$-$day operations and to avoid liquidity crises. For external users like creditors, it's a way to gauge a company's financial stability before extending credit. A higher current ratio indicates strong liquidity, while a lower ratio may signal potential cash flow issues.

The debt$-$to$-$equity ratio, calculated as total debt divided by total equity, is a solvency ratio that measures financial leverage. This ratio is a crucial tool for internal users to evaluate the company's financial risk and capital structure. A high debt$-$to$-$equity ratio can be a red flag, signaling excessive reliance on debt financing, which can lead to higher interest expenses and financial instability. External investors and creditors also use this ratio to determine whether a company is overleveraged before investing or lending.

The return on equity $($ROE$),$ calculated as net income divided by shareholder equity, measures a company's profitability relative to shareholders' investments $($Brigham & Ehrhardt, $2022).$ Internal users, particularly executives, analyze ROE to assess how effectively management generates profit from equity financing. External investors use ROE to compare the company's performance with industry peers before making investment decisions. A consistently high ROE indicates strong financial performance and effective management.

While financial ratios provide valuable insights, they are not sufficient for making internal or external decisions at a company$-$wide level. To ensure a more accurate assessment of a company's health and future potential, it's crucial to consider other factors such as industry trends, economic conditions, competitive positioning, and qualitative aspects like management effectiveness. A comprehensive analysis that integrates financial ratios with these non$-$financial indicators is the key to making well$-$informed decisions.