Question

Ratio analysis means very little unless the ratios developed for a particular company at a given...

Ratio analysis means very little unless the ratios developed for a particular company at a given point in time are compared with its historical ratios, industry averages, or both.

TRUE or FALSE

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

True, Ratio analysis means very little unless the ratios developed for a particular company at a given point in time are compared with its historical ratios, industry averages, or both.

Example- The price-earnings ratio of Amazon won't tell anything except its share price is X's times of its earnings, to get any meaningful result out of it, we have to compare its previous periods p/e ratio to discern whether the same is increasing or decreasing in comparison to itself and also with other tech companies.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the following two statements: I. The income statement measures the flow of funds into (i.e....
Consider the following two statements: I. The income statement measures the flow of funds into (i.e. revenue) and out of (i.e. expenses) the firm over a certain time period. It is always based on accounting data. II. The balance sheet is a financial statement measuring the flow of funds into and out of various accounts over time while the income statement measures the progress of the firm at a point in time. Options: Only Statement II is true Both statements...
eBook Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced...
eBook Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at par, so the market value of its debt equals its book value. Since dollars are in thousands, number of shares are shown in thousands too. Barry Computer Company: Balance Sheet as of December 31, 2019 (In Thousands) Cash $ 249,900 Accounts payable $ 249,900 Receivables 678,300 Other current liabilities 232,050 Inventories 428,400 Notes payable to bank 89,250    Total current assets $ 1,356,600    Total...
Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at...
Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at par, so the market value of its debt equals its book value. Since dollars are in thousands, number of shares are shown in thousands too. Barry Computer Company: Balance Sheet as of December 31, 2018 (In Thousands) Cash $212,520 Accounts payable $182,160 Receivables 516,120 Other current liabilities 136,620 Inventories 425,040 Notes payable to bank 182,160    Total current assets $1,153,680    Total current liabilities $500,940 Long-term...
Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at...
Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at par, so the market value of its debt equals its book value. Since dollars are in thousands, number of shares are shown in thousands too. Barry Computer Company: Balance Sheet as of December 31, 2019 (In Thousands) Cash $ 93,800 Accounts payable $ 150,080 Receivables 234,500 Other current liabilities 93,800 Inventories 206,360 Notes payable to bank 93,800    Total current assets $ 534,660    Total current...
1. Which of the following is not a true statement about effective ratio analysis? Ratios should...
1. Which of the following is not a true statement about effective ratio analysis? Ratios should NOT be used to compare across time or across firms. Ratios should be analyzed in isolation. Ratios are used by Managers to help evaluate the future as well as an attempt to gauge how to correct current deficiencies. Ratios are used by Bankers to evaluate the ability of the firm to maintain certain levels of debt and interest. Ratios are used by the owners...
Asset management ratios are used to measure how effectively a firm manages its assets, by relating...
Asset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested in a particular type of asset (or group of assets) to the amount of revenues the asset is generating. Examples of asset management ratios include the average collection period (also called the days sales outstanding ratio), the inventory turnover ratio, the fixed asset turnover ratio, and the total asset turnover ratio. Consider the following case: Walker Telecommunications has...
The _____________ analysis involves taking all of the absolute figures on the company’s financial statements and...
The _____________ analysis involves taking all of the absolute figures on the company’s financial statements and converting them to percentages. ratio trend common-size All of the above. Which of the following is a category in ratio analysis? market ratios profitability ratios liquidity ratios All of the above. With ___________ analysis, you choose a particular base year and set every single figure in that year’s financial statement equal to 100%. You then look at subsequent years, comparing each individual line in...
TRUE/FALSE Simply calculating the various ratios tells everything you need to know about a company. You...
TRUE/FALSE Simply calculating the various ratios tells everything you need to know about a company. You would expect a produce market to have a low inventory turnover ratio. The Acid Test Ratio uses only the most liquid current assets in its calculation. The Current Ratio uses only the most liquid current assets in its calculation. The Inventory Turnover Ratio indicates the number of times Accounts Receivable are turned into cash during the period. The Return on Sales Ratio indicates how...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company:...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $   220,000 Accounts payable $   600,000 Receivables 1,575,000 Notes payable 100,000 Inventories 1,155,000 Other current liabilities 540,000   Total current assets $2,950,000   Total current liabilities $1,240,000 Net fixed assets 1,325,000 Long-term debt 400,000 Common equity 2,635,000 Total assets $4,275,000 Total liabilities and equity $4,275,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2019 (Thousands...
Ratios Compared with Industry Averages - Company X manufactures various plastic and synthetic products. Financial statement...
Ratios Compared with Industry Averages - Company X manufactures various plastic and synthetic products. Financial statement data for the firm is as follows: 2015 ($ thousands, except Earnings per Share) Sales revenue $815,000 Cost of goods sold 540,000 Net income 50,500 Dividends 14,000 Earnings per share 4.04 COMPANY X BALANCE SHEETS ($ IN THOUSANDS) DEC. 31, 2015 DEC. 31, 2014 ASSETS Cash $4,100 $2,700 Accounts receivable (net) 66,900 60,900 Inventory 148,000 140,000 TOTAL CURRENT ASSETS 219,000 203,600 Plant assets (net)...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT