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1) Financial ratios are used to assess a company's statements because they A) Eliminate the difference of scale between com B) Allow a comparison of companies from different industrial sectors C) Eliminate the effects of inflation from period to period D) Immediately identify problems that must be corrected in a business E) Provide a standard set of calculations to analyze any business panies 2) Before undertaking ratio analysis, a prudent first step is to A) Select the specific ratios to be used B) Determine who the target user is and their needs C) Assemble the information required for the analysis D) Review the economic and competitive environment E) Select either a trend analysis or benchmark analysis 3) The reliability of liquidity ratios are significantly affected by A) Competitive environment B) Company size C) Company profitability D) Seasonality E) Age of capital assets 4) Which of the following represents the most appropriate description of horizontal analysis? A) An analyst prepares pro forma financial statements for the next five years. n analyst compares financial ratios of a company over the last five years. C) An analyst compares financial ratios for the current year for two companies. D) An anal prepares ratios to determine what sales are required to earn a profit. E) An analyst develops ratios to determine how much the company needs to borrow