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Financial ratios serve as a crucial tool for management by relating various financial statements to one another, providing a comprehensive overview of a company's performance. These ratios enable managers to make informed decisions by highlighting relationships between different financial metrics, such as profitability, liquidity, efficiency, and leverage.

For example, by analyzing the relationship between net income and sales, management can assess how effectively the company is generating profit from its sales revenue. Similarly, liquidity ratios can indicate the company's ability to meet short-term obligations by evaluating current assets relative to current liabilities. This relational understanding allows management to identify strengths and weaknesses within the organization.

Using financial ratios fosters a more nuanced insight into the company's financial health rather than focusing solely on isolation of figures or dollar amounts, which is what budgeting involves. Additionally, financial ratios do not replace financial statements; rather, they complement them by transforming raw data into meaningful indicators of performance. Finally, while some ratios may focus on profitability, financial ratios as a whole encompass a broader scope of financial insight. Thus, relating financial statements to each other is a fundamental advantage of employing financial ratios in management practices.