We will be learning about financial statement analysis. This refers to assessing the financial statements of a firm and determining the financial health of the firm. The primary method of assessing financial health is to calculate a series of ratios, referred to as ratio analysis.

1. which of these two firms management teams is doing a better job? Why?

CompanyAB

Sales100,00020,000

Profits10,0004000

2. A firms current ratio, or the C/R ratio is 1.4 and its profit margin ratio is 8.2%. Is the company doing well? Is it making progress?

3. WHY do we normally study TRENDS in ratios,not just the ratios themselves?