1. What insights does the statement of Cash Flows provide regarding financial analysis? 2. Why are financial ratios used? List the five major categories of ratios presented in the chapter. 3. Identify and write out the equations for six profitability ratios. What do each of these ratios specifically measure? 4. Why is the basic earnings power ratio (BEP) useful? 5. Why does the use of debt lower ROA? 6. Identify and write out the equations for four ratios that are used to measure how effectively a firm is managing its assets. What do each of these ratios specifically measure? 7. What problem might arise when comparing different firms' fixed assets turnover ratios? 8. Identify and write out the equations for two ratios that are used to analyze a firm's liquidity position. What do each of these ratios specifically measure? 9. What are the characteristics of a liquid asset? Which current asset is typically the least liquid? Why? 10. How does the use of financial leverage affect current stockholders' control position? 11. Identify and write out the equations for seven ratios that are used to measure the extent to which a firm uses financial leverage. What do each of these ratios specifically measure? 12. Identity and write out the equations for four market value ratios. What do each of these ratios specifically measure? 13. If one firm's P/E ratio is lower than that of another, what are some factors that might explain the difference? 14. Explain why book values often deviate from market values. 15. What is a trend analysis, and what important information does it provide? 16. What is common size analysis and percentage change analysis? 17. What is comparative analysis and benchmarking? 18. List at least three potential problems with ratio analysis. 19. Different groups conduct financial ratio analysis. These groups could include managers, equity investors, long-term and short term creditors. What is the primary emphasis of each of these groups in evaluating ratios