Why do analysts use financial ratios rather than the absolute numbers? Give an example.
Answer to relevant QuestionsBesides comparing a company's performance to its total industry, discuss what other comparisons should be considered within the industry.Give an example of how a cash flow ratio might differ from a proportion of debt ratio.Assuming these ratios differ for a firm (e.g., the cash flow ratios indicate high financial risk, while the proportion of debt ratio ...Select one of the limitations of ratio analysis and indicate why you believe it is a major concern.Discuss why you would not expect all industries to have a similar relationship to the economy. Give an example of two industries that have different relationships to the economy.Discuss why the two valuation approaches (present value of cash flows and the relative valuation ratios) are competitive or complementary.
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