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77julia77 [94]
3 years ago
7

A financial ratio by itself tells us little about a company since financial ratios vary a great deal across industries. There ar

e two basic methods for analyzing financial ratios for a company: time trend analysis and peer group analysis. Why might each of these analysis methods be useful? What does each tell you about the company’s financial health?
Business
1 answer:
Sergio [31]3 years ago
3 0

Answer:

When doing time trend analysis for financial ratios we can know how a company's ratio's have changed over time or if they have remained the same, so for example if a company's current ratio was less than 1 a year ago and is 3 now it means that the company was not very liquid a year ago but since then has made changes because of which it is liquid now, so we can see how a company has performed over a certain period of time.

On the other hand peer group analysis tells us how a company is performing compared to other companies in the same industry. For example if our cement company has a profit margin of 7% but the industry average is 15% we know that our company is doing something wrong  or different as compared to the industry and we can look into it.

Explanation:

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