Question

What four financial statements are contained in most annual reports? Why would the inventory turnover ratio be more important for someone analyzing a grocery store chain than an insurance company?

Answer 1

Part 1:

The four financial statements contained in most of the annual reports are:
i)Balance sheet
ii)Income statement
iii)Statement of stockholders' equity
iv)Cash flow statement

Part 2:
The formula used to calculate the inventory turnover ratio=Cost of goods sold/Average inventory

A grocery store will have larger inventories with some perishable goods in the inventory. So, it is important to calculate the inventory turnover ratio.
An insurance company will have almost zero to no inventory because it is into sales of insurance policies. The insurance policies are written on papers or saved online. Insurance companies do not sell tangible goods like grocery shops.
It is important to examine a company's business first, then comes the ratio analysis part.