Question 3

a. Why are financial statements standardized? Explain at least two methods for standardizing financial statements. (3 marks)

b. Using any Income statement and Statement of Financial Position of your choice (kindly show these statements), demonstrate how you would evaluate the profitability, asset management, liquidity and debt management of a firm over a two year period. (8 marks)

c. What is the Du Pont Identity? What is the rationale for computing it? (2 marks)

d. Are there limitations to the use of ratio analysis? Explain. (2 marks)