ratio analysis 33
1A. As your text describes, ratio analysis is a common technique in financial analysis. One of your colleagues states that a thorough ratio analysis is all that is needed in considering the financial health of a company. Although you agree that ratio analysis is a helpful guide, there may be some potential pitfalls in ratio analysis.
Discuss at least three potential issues in utilizing ratio analysis that you would share with your colleague. In addition, calculate a liquidity, profitability, and efficiency ratio from your Week Six company to demonstrate your observations. (350 Words)
1B. Go to MSN Money (Links to an external site.). (http://investing.money.msn.com/investments/key-ratios) and type in a ticker symbol for a company with the first letter of your last name.
Next, complete the following:
- On the company page that you selected click on the “Analysis†tab. After doing so, scroll down the page until you see the Financial ratios for the company and the industry.
- There are several categories listed for ratios. Select one “Financial Condition Ratio†and one “Management Efficiency Ratioâ€.
- Also on the company page, on the same ribbon that you found the “Analysis†tab you will find the “Related†tab. Click on it and select a competitive company within that industry and compare those ratios to the ones you just found.
Examine your findings and determine whether your company outperforms its competition based on financial ratios. Identify where your firm seems to lag. Describe how your firm compares with the industry and speculate as to why you believe your firm is performing as it is. (350 Words)
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