Financial ratios can be divided into four categories, depending upon the purpose of the analysis. Discuss the four categories: internal liquidity, operating performance, risk analysis and growth analysis.

Q: Identify five limitations of ratios as a tool of financial analysis.

A: Ratio analysis is important for the company because with the help of the ratio, a company analyzes…

Q: What are the different ways to calculate the Financial ratios?

A: Financial ratios:   Financial ratios are the metrics used to evaluate the capabilities,…

Q: Discuss the concept of financial statement analysis and the different tools and techniques used to…

A: A financial statement is a formal record of the financial activities, position, and performance of a…

Q: 1. What is and describe the “five question approach” to using financial ratios?

A: The "five question approach" clusters financial ratios around important questions that may be…

Q: Which financial ratios would you recommend to evaluate a company's solvency? Once these ratios are…

A: To evaluate company solvency,  Solvency ratios are the company long-term ability to cover the…

Q: Describe the approach to financial statement analysis

A: Financial statement analysis: Financial statement analysis is a valuable measure for evaluating…

Q: The three input ratios (not output) to the DuPont model of financial statement analysis are: a) Net…

A: Du-point Analysis is the method of measuring the performance of the company. It measures the return…

Q: Briefly describe five limitations of financial statement analysis.

A: Financial statement analysis is a process made for analysing the financial statements of the company…

Q: Describe at least three problems encountered in the analysis of financial indicators.

A: Financial indicators are utilized by firms almost everywhere and in all sizes in order to provide…

Q: Why is it important to analyze trends in various financial ratios as well as their absolute levels?

A: Accounting ratio:   It is a number expressed in terms of another to establish relationship among…

Q: Identify the three types of comparisons commonly used in financial statement analysis.

A: Financial Statement Analysis: The financial statement analysis is the process of analyzing the…

Q: Discuss what the three main financial statements are and what they tell you. What do financial…

A: Financial statements are essential documents that provide a comprehensive overview of a company's…

Q: Explain three purposes or objectives of Financial Analysis.

A: The financial statement analysis refers to the analysis of all the financial statements of the…

Q: Explain why the comparison of financial ratios may be more meaningful than the comparison of figures…

A: Financial analysis is a crucial aspect of decision-making for investors, creditors, and company…

Financial Ratios

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.

Return on Equity

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.