You work as an analyst at a credit-rating agency, and you are comparing firms in the construction and engineering sector. One company in the portfolio of companies you are analyzing is a Chinese firm. This firm stands out in the ratio analysis, because the companys financial ratios are substantially lower than identical financial ratios of the other firms in the sector. You do not dissect the results of the ratio analysis and categorize report this firm as an under-performing company.

Which of the following statements about your analysis report is true?

- The analysis likely includes incorrect and misleading conclusions.

- The ratios provide an accurate and thorough representation of the Chinese companys performance.

There are several groups of ratios most decision makers and analysts use to examine different aspects of a companys performance. Based on the descriptions of ratios listed, identify the relevant category of ratios.

Ratios that help determine whether a company can access its cash and pay its debts that mature in less than a year are called (liquidity, debt or financial leverage management, dividend policy, profitability, market-value or market-based) ratios.

These ratios, which help determine how efficiently a firm is using its assets to generate sales are called (dividend policy, asset management or activity, debt or financial leverage management, market-value or market-based, profitability) ratios.

Ratios that help assess a companys ability to service the interest and repayment obligations on its long-term debt and the degree to which it uses borrowed versus invested financial capital are called (dividend policy, debt or financial leverage management, market-value or market-based, profitability, or assets management or activity) ratios.

(Asset management or activity, divided policy, debt or financial leverage management, market-value or market-based, profitability) ratios help measure a companys ability to generate income and profits based on its invested capital.

(Asset management or activity, divided policy, debt or financial leverage management, market-value or market-based, profitability) ratios examine the market value of a companys share price, its profits and cash dividends, and the book value of the firms assets and relate them to other data items to determine how the firm is perceived in the stock market.