Along with calculating the ratios, what else is needed for your report?

Making observations and identifying trends that are suggested by the ratio analysis

Identifying the factors that drive the trends in the ratios

Both of the above

Most decision makers and analysts use five groups of ratios to examine the different aspects of a company's performance. Indicate whether each of the following statements regarding financial ratios is true or false.

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$\backslash$table$[[$Statement$],[$A company exhibiting a high liquidity ratio is likely to have enough resources to pay off its short$-$term obligations.$],[$Asset management or activity ratios provide insights into management's efficiency in using a firm's working capital and long$-$term$],[$assets$.],[$Debt or financial leverage ratios help analysts determine whether a company has sufficient cash to repay its short$-$term debt$],[$obligations$.],[$One possible explanation for an increase in a firm's profitability ratios over a certain time span is that the company's income has$],[$increased$.],[$Market value or market based ratios help analysts figure out what investors and the markets think about the firm's growth$],[$prospects or current and future operational performance.$]]$

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.

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