1. Ratio analysis Aa Aa A company reports accounting data in its financial statements. This data is used for financial analyses that provide insights into a company's strengths, weaknesses, performance in specific areas, and trends in performance. These analyses are often used to compare a company's performance to that of its competitors, or to its past or expected future performance. Such insight helps managers and analysts improve their decision making. Consider the following scenario: You work for a brokerage firm. Your boss asked you to analyze Blue Parrot Manufacturing's performance for the past three years and to write a report that includes a benchmarking of the company's performance. Which of the following components would be best for you to include in your financial statement analysis? O A critique of the company's financial statements and a report of any misprints to be sent to the Securities and Exchange Commission A calculation of financial ratios and an evaluation of the comparative trends in the firm's financial position and performance over a certain time period There are several groups of ratios most decision makers and analysts use to examine different aspects of a company's performance. Based on the descriptions of ratios listed, identify the relevant category of ratios. Ratios that help determine whether a company can access its cash and pay its short-term obligations are called liquidity ratios. Ratios that help determine the efficiency with which a company manages its day-to-day tasks and assets are called asset management or activity ratios. ons of ratios listed, identify the relevant category Ratios that help determine whether a company can liquidity ratios. market-value or market-based profitability th which liquidity ratios. dividend policy to service debt or financial leverage management to which it uses Dorrowed versus invested Tinancial cl ratios hel Profitability invested capital. Market value or market-based ratios exal dividends, and the book value of the firm's assets and the stock market. atio analysis is an important component of evaluating company erformance. It can provide great insights into how a company natches up against itself over time and against other players within the industry. However, like many tools and techninis atin analysis has a few profitability th which a company manages its day-to-day tasks and assets are called liquidity ratios. dividend policy debt or financial leverage management to service the interest and repayment obligations on its long-term debt and the degree TO WATCH IT Uses corrowed versus investea Tinancial capital are called debt or financial leverage management ratios. Profitability invested capital. ratios help measure a company's ability to generate income and profits based on its Market-value or market-based ratios examine the market value of a company's share price, its profits and cash dividends, and the book value of the firm's assets and relate them to other data items to determine how the firm is perceived in the stock market Ratio analysis is an important component of evaluating company performance. It can provide great insights into how a company matches up against itself over time and against other players within the industry Which of the following statements represent a weakness or limitation of ratio analysis? Check all that apply. However, like many tools and techniques, ratio analysis has a few limitations and weaknesses. A firm may operate in multiple industries. Afirm's financial statements show only one period of financial data. Different firms may use different accounting practices
