Contemporary Financial Management
14th Edition
ISBN: 9781337090582
Author: R. Charles Moyer, James R. McGuigan, Ramesh P. Rao
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 3, Problem 1QTD
Summary Introduction
To discuss: Limitations of ratio analysis as a measure of financial statement analysis.
Expert Solution & Answer
Explanation of Solution
The limitations of the ratio analysis are as follows,
- Ratios cannot be calculated effectively when the numerator and denominator have opposite signs.
- If denominator can be zero, then the interpretation of ratios is meaningless.
- It may not capture the changing strategy of the company, and hence an analyst could miss the crucial changes in the enterprise design.
- It cannot be useful for better understanding during extraordinary periods like a period of low growth or high growth.
- Ratios can be used as a standalone figures, this must have used previous year’s ratios for comparison purposes.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
For EnPro, Please find the following values using the pdf (value line) provided . Please no excle.
When finding R, use the formula: Risk Free Rate + Beta * (Market Rate – Risk Free Rate)
The Risk Free Rate will always be 0.016 and the Market Rate will always be 0.136 for this problem. (For R, I got 17.2%, If I'm wrong can you please explain how)
On Value Line: DPO = All Div'ds to Net Profit
On Value Line: ROE = Return on Shr. Equity
On Value Line: P/E = Avg Ann'l P/E ratio*
The first 4 results should be rated to the year 2025 (r, Average DPO, Growth rate, Average P/E)
r= _
Average DPO= _
Growth rate= _
Average P/E= _
2026 EPS= _
2027 EPS= _
2028 EPS= _
2026 dividend= _
2027 dividend= _
2028 dividend= _
2028 price= _
2028 total cash flow Intrinsic value= _
You want to buy equipment that is available from 2 companies. The price of the equipment is the same for both companies. Gray
Media would let you make quarterly payments of $1,430 for 7 years at an interest rate of 1.59 percent per quarter. Your first payment to
Gray Media would be today. River Media would let you make monthly payments of $X for 8 years at an interest rate of 1.46 percent per
month. Your first payment to River Media would be in 1 month. What is X?
Input instructions: Round your answer to the nearest dollar.
59
You want to buy equipment that is available from 2 companies. The price of the equipment is the same for both companies. Gray
Media would let you make quarterly payments of $14,000 for 6 years at an interest rate of 1.50 percent per quarter. Your first payment
to Gray Media would be in 3 months. Island Media would let you make monthly payments of $X for 4 years at an interest rate of
1.35 percent per month. Your first payment to Island Media would be today. What is X?
Input instructions: Round your answer to the nearest dollar.
99
Chapter 3 Solutions
Contemporary Financial Management
Ch. 3 - Prob. 1QTDCh. 3 - Prob. 2QTDCh. 3 - Prob. 3QTDCh. 3 - Prob. 4QTDCh. 3 - Prob. 5QTDCh. 3 - Prob. 6QTDCh. 3 - Prob. 7QTDCh. 3 - Prob. 8QTDCh. 3 - Prob. 9QTDCh. 3 - Prob. 10QTD
Ch. 3 - Prob. 11QTDCh. 3 - Prob. 12QTDCh. 3 - Prob. 13QTDCh. 3 - Prob. 14QTDCh. 3 - Prob. 1PCh. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - Prob. 7PCh. 3 - Prob. 8PCh. 3 - Prob. 9PCh. 3 - Prob. 10PCh. 3 - Prob. 11PCh. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - Prob. 16PCh. 3 - Prob. 17PCh. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Prob. 21P
Knowledge Booster
Similar questions
- You plan to retire in 7 years with $X. You plan to withdraw $54,100 per year for 15 years. The expected return is 13.19 percent per year and the first regular withdrawal is expected in 7 years. What is X? Input instructions: Round your answer to the nearest dollar. SAarrow_forwardYou plan to retire in 3 years with $911,880. You plan to withdraw $X per year for 18 years. The expected return is 18.56 percent per year and the first regular withdrawal is expected in 3 years. What is X? Input instructions: Round your answer to the nearest dollar. $ 59arrow_forwardYou just borrowed $203,584. You plan to repay this loan by making regular quarterly payments of X for 69 quarters and a special payment of $56,000 in 7 quarters. The interest rate on the loan is 1.94 percent per quarter and your first regular payment will be made today. What is X? Input instructions: Round your answer to the nearest dollar. $arrow_forward
- I got 1.62 but it's wrong why?arrow_forwardYou plan to retire in 8 years with $X. You plan to withdraw $114,200 per year for 21 years. The expected return is 17.92 percent per year and the first regular withdrawal is expected in 9 years. What is X? Input instructions: Round your answer to the nearest dollar. 69 $arrow_forwardHow much do you need in your account today if you expect to make quarterly withdrawals of $6,300 for 7 years and also make a special withdrawal of $25,700 in 7 years. The expected return for the account is 4.56 percent per quarter and the first regular withdrawal will be made today. Input instructions: Round your answer to the nearest dollar. $arrow_forward
- For EnPro, Please find the following values using the pdf (value line) provided . Please no excle. On Value Line: DPO = All Div'ds to Net Profit On Value Line: ROE = Return on Shr. Equity On Value Line: P/E = Avg Ann'l P/E ratio* r= _ Average DPO= _ Growth rate= _ Average P/E= _ 2026 EPS= _ 2027 EPS= _ 2028 EPS= _ 2026 dividend= _ 2027 dividend= _ 2028 dividend= _ 2028 price= _ 2028 total cash flow Intrinsic value= _arrow_forwardDon't used hand raitingarrow_forwardYou want to buy equipment that is available from 2 companies. The price of the equipment is the same for both companies. Gray Media would let you make quarterly payments of $14,000 for 6 years at an interest rate of 1.50 percent per quarter. Your first payment to Gray Media would be in 3 months. Island Media would let you make monthly payments of $X for 4 years at an interest rate of 1.35 percent per month. Your first payment to Island Media would be today. What is X? Input instructions: Round your answer to the nearest dollar. SA $arrow_forward
- You want to buy equipment that is available from 2 companies. The price of the equipment is the same for both companies. Gray Media would let you make quarterly payments of $1,430 for 7 years at an interest rate of 1.59 percent per quarter. Your first payment to Gray Media would be today. River Media would let you make monthly payments of $X for 8 years at an interest rate of 1.46 percent per month. Your first payment to River Media would be in 1 month. What is X? Input instructions: Round your answer to the nearest dollar. $arrow_forwardYou just borrowed $203,584. You plan to repay this loan by making regular quarterly payments of X for 69 quarters and a special payment of $56,000 in 7 quarters. The interest rate on the loan is 1.94 percent per quarter and your first regular payment will be made today. What is X? Input instructions: Round your answer to the nearest dollar. 59arrow_forwardYou plan to retire in 4 years with $698,670. You plan to withdraw $X per year for 17 years. The expected return is 17.95 percent per year and the first regular withdrawal is expected in 5 years. What is X? Input instructions: Round your answer to the nearest dollar. $arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning