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State 3 uses and 3 limitations of financial statement ratio analyses. Cite 4 actions the firm...

State 3 uses and 3 limitations of financial statement ratio analyses.

Cite 4 actions the firm can take to increase sustainable growth?

What does the ‘Internal Growth Rate’ measure?

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Answer #1

3 uses of financial ratios

1. Straightforward , shows the increase or decrease quantitatively

2. Easy to calculate

3 Easy to understand

3 limitations of financial ratios

1. Can mislead due to accounting manipulation

2. There are many ratios and many times they contradict eachother

3. Need to adjust financial statements before calculating viable financial ratios

4 actions to increase sustainable growth are

1. Decrease dividends paid

2. Increase net income

3. Increase sales and reduce cost

4. Increase retention ratio

Internal growth rate measures the increase in the sales and profit of the firm over the coming years without raising debt

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