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Financial Ratios have NO UNDERLYING THEORY - This means the calculated Value of a Ratio is Good or bad cannot be decided In order to
Financial Ratios have NO UNDERLYING THEORY - This means the calculated Value of a Ratio is Good or bad cannot be decided In order to make sense out of the Financial Ratios of a Fim, We use so called benchmarking of the Ratlos by comparing them alther with the Industry Avg Ratios and/or main competitors of the Firm. All of the following statements lists the Problems with analysis the Antios, Execoting Of The Ratios of the Firm are. Compared olther with the similar Firms and/or Industrial Avg Ration of the same industry in the USA b. In the USA wo use Generally accepted Accounting Principles GAAP), but there is no Universal GAAP. This means Ration of a Domestic Firm cannot be compared with the Ratios of a similar forign Fifm. The Ratios of a non-Conglomerate Firm cannot be compared that of a conglomerate Firm Od Accounting Procedures, such as Calculation of the COGS, using LIFLFIFI, OR ACM, can increase or decrease the Net Income of a Firm
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