Which financial measure can assist in comparing performance over different periods?

Financial ratios serve as important tools for comparing performance over different periods because they help to standardize financial data, allowing for a clearer analysis of trends and performance metrics. Ratios, such as profit margin, return on equity, and current ratio, provide insights into a company's operational efficiency, liquidity, and profitability through a relative measure rather than just absolute numbers. This relative comparison can highlight improvements or declines in performance regardless of variations in size or scale over time.

For example, if a business wants to compare its profitability from one year to the next, looking at financial ratios allows for an apples-to-apples comparison that adjusts for any growth or contraction in sales or revenues. Thus, the utility of financial ratios in tracking performance trends makes them a crucial element in financial analysis and decision-making.