Question: Listed below are certain financial ratios used by analysts: Liquidity: current ratio; cash flow from operations to current liabilities Solvency: debt to equity;

Listed below are certain used by analysts:
• Liquidity: current ratio; cash flow from operations to current liabilities
• Solvency: debt to equity; debt to assets
• Profitability: return on assets; return on equity

Required:
Assume that you are comparing the of companies from two countries discussed in this chapter. Discuss how the accounting practices identified in Exhibit 3-6 would affect your comparison for each of the six ratios in the list.

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a All countries require the purchase method so there is no effect on the ratios for this method b All countries require that goodwill be capitalized a... View full answer

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