What are some potential problems and limitations of financial ratio analysis?
The first part of the case, presented in Chapter 7, discussed the situation that Computron Industries was in after an expansion program. Thus far, sales have not been up to the forecasted level, costs have been higher than were projected, and a large loss occurred in 2009, rather than the expected profit. As a result, its managers, directors, and investors are concerned about the firm€™s survival. Donna Jamison was brought in as assistant to Fred Campo, Computron€™s chairman, who had the task of getting the company back into a sound financial position. Computron€™s 2008 and 2009 balance sheets and income statements, together with projections for 2010, are shown in the following tables. Also, the tables show the 2008 and 2009 financial ratios, along with industry average data. The 2010 projected financial statement data represent Jamison€™s and Campo€™s best guess for 2010 results, assuming that some new financing is arranged to get the company €œover thehump.€

Short-term investments Total current assets S1.946.802 Less: Accumulaaed depreciation Liabilities and Equity 2 lotal current liabilities Common stock (100,000 shares) Total liabilities and equity Noter "E indicates estimated. The 2010 data are torecasts.