Question: Q 1 - Common - size analysis is a simple way to make financial statements of different firms comparable. What are possible shortcomings of comparing

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Common

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size analysis is a simple way to make financial statements of different firms comparable. What are possible shortcomings of comparing two different firms using common

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size analysis?Q

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Firm A reports an increase in earnings per share; Firm B reports a decrease in earnings per share. Is this unconditionally informative about each firms performance? If not, why is earnings per share so commonly discussed in the financial press?Q

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Describe the difference between the profit margin for ROA and the profit margin for ROCE. Explain why each profit margin is appropriate for measuring the rate of ROA and the rate of ROCE, respectively.Q

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Define financial leverage. Explain how financial leverage works to the benefit of the common shareholders.

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