Financial analysis is used by managers to evaluate their business operations, by creditors to assess credit worthiness, and by investors to evaluate potential investments. Investors often use fundamental analysis when evaluating stocks. Fundamental analysis uses revenues, earnings, future growth, return on equity, profit margins, and other data to determine a company's underlying value and potential for future growth. Investors often use trend analysis and ratio analysis as tools when performing fundamental analysis.

In this discussion, you will assume the role of an investor who has $10,000 to invest and is trying to choose between several different stock. From the ratios listed in the chapter, please select the three ratios that you think would be the most helpful in comparing stocks and explain why you chose those three ratios. What financial characteristics are you trying to identify with the ratios? How would you interpret the ratios? Post your selections and reasoning in the discussion board. Read the postings of your classmates and select two for responses. Review the three ratios your classmate selected, then suggest a fourth ratio they could use to enhance their stock selection. Explain how you think this additional ratio would help them enhance their stock selection and how they should interpret the results of this additonal ratio.