Financial Analysis Techniques Flashcards
1
Q
Use of financial ratios
A
Project future earnings & CF
Evaluate firms flexibility
Assess management performance
Evaluate changes in firm
Comparison with competitors
2
Q
Limitation of financial ratios
A
Not to be used in isolation
Different accounting treatments
Difficut to find comparable industry ratio for multi-industry companies
Conclusions shouldn’t be based on one ratio
Target/comparable ratios difficult to find
3
Q
Categories of ratios
A
Activity
Liquidity
Solvency
Profitability
