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Why do normally study trends in ratios

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Reference no: EM132630719

His refers to assessing the financial statements of a firm and determining the financial health of the firm. The primary method of assessing financial health is to calculate a series of ratios, referred to as ratio analysis.

Problem 1: Which of these two firms management teams is doing a better job? Why?

Company                 A                        B

Sales                  100,000           20,000

Profits                10,000              4000

Problem 2: A firms current ratio, or the C/R ratio is 1.4 and its profit margin ratio is 8.2%. Is the company doing well? Is it making progress?

Problem 2: WHY do we normally study TRENDS in ratios, not just the ratios themselves?

Reference no: EM132630719

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