Financial Statement Analysis There are primarily five categories of ratios: Liquidity, Asset management (or utilization), profitability, debt, and market value ratios. Different stakeholders of the company may be more interested in different categories of ratios. For example, a bank that is making a decision on whether or not to make a loan to a company may look at the firm's current debt levels and also at their liquidity levels. Other stakeholders include suppliers to the company, prospective stockholders, and management of the company itself. Discuss the category(ies) of ratios that each of these stakeholders may view first. Capital Budgeting a) From recent surveys of S &P 500 companies, most all use net present value (NPV) and modified internal rate of return (MIRR) methods in choosing new projects. The payback method is used as a secondary method, perhaps when there is a "close call" in choosing between two different projects. Why is the payback method not used as a primary method of choosing the most valuable projects to undertake? b) Many times, firms look for projects to diversify their operations (i.e., reduce risk of cash flows from operations). In evaluating projects that have different levels of predictability (i.e., risk), what adjustment(s) can a financial analyst make in order to account for this different risk level? [The financial analyst is attempting to place a value today on a project]