Ratio analysis is a tool used to assess the financial health of an organization by comparing various numerical values of different components in relation to each other. It is usually employed in order to identify any potential improvements or weaknesses that could be addressed, as well as provide insight into how a company may compare with its competitors. By taking a look at the ratios for a given company and its top competitor, we can learn quite a bit about their respective strengths and weaknesses.

The first set of ratios to consider are those related to liquidity; or how quickly assets can be liquidated for cash if necessary. Examples include current ratio, quick ratio, and operating cash flow ratio. The higher these numbers are for both companies, the more evidence there is that they have adequate resources available should they need them in case of emergencies. This indicates strong short-term stability.