Which of the following best describes the purpose of financial ratio analysis?

Financial ratio analysis serves the crucial purpose of assessing a company's financial stability. By analyzing various financial ratios, stakeholders can evaluate how well a company is maintaining its financial health and its ability to meet its obligations. Ratios such as debt-to-equity, current ratio, and liquidity ratios provide insights into how effectively a company is utilizing its resources, managing its debts, and maintaining a strong solvency position.

This kind of analysis enables investors, creditors, and management to make informed decisions based on the financial structure and performance of the organization. When a company exhibits robust financial ratios, it typically indicates a solid foundation, which can positively affect its ability to raise capital and sustain operations.

Other options focus on different aspects such as profit margins or operational efficiency, but they do not capture the comprehensive evaluation of a company's overall financial condition as accurately as assessing financial stability does.