Question: A ratio is one value expressed to another. A financial ratio is one financial value or measurement expressed to another. There are about 20 financial

A ratio is one value expressed to another. A financial ratio is one financial value or measurement expressed to another. There are about 20 financial ratios commonly used to assess one company's performance compared to another company in the same industry, or to itself over time.
Why or why not do you consider it sound business practice to make financial decisions based solely on the results of calculating financial ratios, for instance, whether to invest in a company or loan money to it?
Is it possible that a "good" financial ratio might be artificially caused by another ratio which is "bad"?

Step by Step Solution

★★★★★

3.38 Rating (164 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Yes Reported values on balance sheets are often different from real values Inflation affects invento... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

1019-B-C-F-D-F(749).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

a. Parry Electronics is a regional electronics wholesaler and distributor that earned $ 1,250,000 in EBITDA this year based on revenues of $ 4,000,000. The enterprise values of publicly traded firms...

The Liquid Chemical Company manufactures and sells a range of high-grade products. Many of these products require careful packaging. The company has a special patented lining made that it uses in...

The idea behind this exercise is for the class to generate data comparing companies in many different industries. This data will be used to compare these industries from an Operations and Supply...

A ratio is one value expressed to another. A financial ratio is one financial value or measurement expressed to another. There are about 20 financial ratios commonly used to assess one company's...

You are trying to determine which of two companies is the most profitable. Which of the following would be the best indicator of relative profitability? A) highest net income B) highest retained...

ICOT Industries issued 27 million of its $1 par common shares for $488 million on April 11. Legal, promotional, and accounting services necessary to effect the sale cost $2 million. Required: 1....

The work output of the diesel cycle of Problem 9.4 is nearest: (A) 560 kJ/kg (B) 490 kJ/kg (C) 450 kJ/kg (D) 420 kJ/kg Figure 9.37 9 q-0 - qout

Exercise 3 : 1 - Use Huffman coding algorithm to encode the following symbols with the frequencies listed: What is the average number of bits used to encode a character? 2 - Do the same for the...

B. decrease the supply of peanut butter

An attendant at a car wash is paid according to the number of cars that pass through. Suppose the probabilities are 1/12, 1/12, 1/4, 1/4, 1/6, and 1/6, respectively, that the attendant receives $7,...

By investing in a particular stock, a person can make a profit in one year of $4000 with probability 0.3 or take a loss of $1000 with probability 0.7. What is this person's expected gain?

Suppose that an antique jewelry dealer is interested in purchasing a gold necklace for which the probabilities are 0.22, 0.36, 0.28, and 0.14 respectively, that she will be able to sell it, for a...

The primary difference between a line of credit and a revolving credit arrangement is the: a. length of the time period covered by the loan agreement b. type of collateral used to secure the loan c....

2-54. Use the Internet to search for examples of each type of horizontal partitioning provided by Oracle. Explain your

Question: The Dow Jones Travel Index reported what business travelers pay for hotel rooms per night in major US. cities. The average hotel room rates for 20 cities are recorded....