ACC4320 Week 4 D2

Suppose you are trying to decide whether to invest in a company that generates a high expected ROE, and you want to conduct further analysis on the company’s performance. If you wanted to conduct a comparative analysis for the current year, you would: Compare the firm’s financial ratios for the current year with its ratios in previous years   Compare the firm’s financial ratios with other firms in the industry for the current year     You decide also to conduct a qualitative analysis based on the factors summarized by the American Association of Individual Investors (AAII). According to your understanding, a company with one key product is considered to be    risky than companies with a wide range of products.   The American Association of Individual Investors (AAII) has identified several qualitative factors that should also be considered when evaluating a company’s likely future financial performance. Consider the scenario and indicate how you would expect the…

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Which of the following statements regarding the PE ratio is true? O A high PE ratio is indicative of a company with questionable future earnings. The higher the PE ratio the greater the risk. O A low PE ratio reflects a company with a strong financial future. O The lower the PE ratio the greater the risk.

While being in different industries, two companies have the same expected earnings per share and the same standard deviation of expected EPS. As a result, the two businesses would face the same business risk. * Correct O Wrong

Please see the attached graph for questions below. What is the difference between the two companies on this ratio? What is a plausible explanation as to why they would differ? Is one company clearly different than the other? Are there economic or end-market influences that explain why the ratios differ? What might they be? Over time, is each company’s overall financial performance improving, declining, or is something strange going on? Do you think evaluating financial statements is a good idea? What do you regard as some of the shortcomings of financial ratio analysis?

Which of the following best describes why the predicted incremental earnings arising from a given decision are not sufficient in and of themselves to determine whether that decision is worthwhile? ... O A. They do not tell how the decision affects the firm's reported profits from an accounting perspective. O B. They are not easily predicted from historical financial statements of a firm and its competitors. O C. They do not show how the firm's earnings are expected to change as the result of a particular decision. O D. These earnings are not actual cash flows.

The quality of earnings concept indicates thata. stockholders want the corporation to earn enough income to be able to pay its debts.b. net income is the best measure of the results of operations.c. continuing operations and one-time transactions are of equal importance.d. income from continuing operations is a more relevant predictor of future performancethan income from one-time transactions

Is the claim that lower company taxes adding to investments correct or is it debatable given the prediction on economic growth remains negative, and can you explain why? Your advise on this is ____________________ (provide your answer and justification. Feel free to use external resources to assist you in your answer if you prefer).

Analysts and investors often use return on equity (ROE) to compare profitability of a company with other firms in the industry. ROE is considered a very important measure, and managers strive to make the company's ROE numbers look good. If a firm takes steps that increase its expected future ROE, its stock price will Based on your understanding of the uses and limitations of ROE, a rational investor is likely to prefer an investment option that has: O High ROE and high risk O High ROE and low risk increase. Suppose you are trying to decide whether to invest in a company that generates a high expected ROE, and you want to conduct further analysis on the company's performance. If you wanted to conduct a comparative analysis for the current year, you would: O Compare the firm's financial ratios with other firms in the industry for the current year Compare the firm's financial ratios for the current year with its ratios in previous years You decide also to conduct a qualitative analysis…

Assuming that the fiscal health of the Health Company is not optimal, explain how Return on Equity (ROE) can help justify paying dividends to shareholders and increasing the company's debts. If Liver Corporation has a lower price/earnings (P/E) ratio than another firm engaged in the same business, what reasons might explain these differences? Describe at least three problems encountered in the analysis of financial indicators. Explain how the DuPont equation can help in analyzing company results.

Analysts and investors often use return on equity (ROE) to compare profitability of a company with other firms in the industry. ROE is considered a very important measure, and managers strive to make the company’s ROE numbers look good. If a firm takes steps that increase its expected future ROE, its stock price will    increase.   Based on your understanding of the uses and limitations of ROE, a rational investor is likely to prefer an investment option that has: High ROE and high risk   High ROE and low risk

1. The more optimistic investors are about a company’s future profits, the ________ the ratio of the company’s market value to book value.greaterlowerno effect on

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Which of the following is not a reason a company would be willing to accept new business at a loss?   A.) The company has the expectation that certain customers can influence other potential customers. B.) The company has the expectation that it will make up for it in later years and has the expectation that certain customers can influence other potential customers. C.) The company has the expectation that its estimates will prove incorrect and that the business will result in a profit. D.) The company has the expectation that it will make up for it in later years.

Which of the following assumptions are necessary for AFN equation to work? 1) The ratios A0/S and LO/S, the profit margin, and payout ratio are stable. 2) Common stock and long-term debt are tied directly to sales. 3) None of the firm's ratios will change. 4) Fixed assets, but not current assets, are tied directly to sales. 5) Last year's total assets were not optimal for last year's sales.

Ratio analysis is an important tool used by financial analysts in determining the future value of a company's stock. 1. Explain which ratios you think are most useful in determining the future viqbility kf a company. 2 What are the importance of benchmarks and red flags that are obvious indicators of future problems?

Financial Ratios analysis is a part of Group of answer choices Fundamental Analysis Economic Analysis Industry Analysis Technical Analysis   2.  Financial Ratio Analysis does not enable us to Group of answer choices Compare financial conditions across firms of different sizes. Determine the best time when to invest in a company’s stock. Measure trends of how well a firm is performing over time. How well a firm is managing its debt.