Question (a) (Short questions)

1. What is (are) the advantage(s) of using common-size statements as against comparative statements in analyzing a companys financial performance and position?

2. What are the advantages and limitations of using financial ratios?

3. ABC company experiences a great deal of seasonal variation in its business activities. The companys high point in business activity is in June; its low point is in January. During which month would you expect the current ratio to be highest?

4. Apple Inc., is in a rapidly growing technological industry. Would you expect the company to have a high or low dividend payout ratio?

5. If a stocks market value exceeds its book value, then the stock is overpriced. Do you agree? Explain.

6. A company with no liabilities is good for investors. Do you agree? Explain