What is the definition of a financial ratio?

A financial ratio represents a numerical relationship between two financial statement items, which provides insights into a company's performance, efficiency, liquidity, profitability, and solvency. By analyzing these relationships, stakeholders can better understand how different aspects of a business relate to one another, facilitating informed decision-making.

For example, common financial ratios include the current ratio (which compares current assets to current liabilities to assess liquidity) and the debt-to-equity ratio (which compares total liabilities to shareholders' equity to evaluate financial leverage). These ratios serve as crucial tools for financial analysis, allowing for comparisons across time periods or between different companies in the same industry.

While the other options touch upon aspects of financial analysis, they do not encompass the broader and more precise definition of a financial ratio. Comparing company expenses to revenues is just one specific application, market trend analysis is a wider context that may involve various data points, and measuring cash flow generation does not specifically relate to quantifying relationships between items on financial statements. Thus, the correct answer accurately captures the essence of what a financial ratio is.