Question

A company reports accounting data in its financial statements. This data is used for financial analyses that provide insights into a company’s strengths, weaknesses, performance in specific areas, and trends in performance. These analyses are often used to compare a company’s performance to that of its competitors or to its past or expected future performance. Such insight helps managers and analysts improve their decision making. Consider the following scenario: Your boss asked you to analyze Green Hamster Manufacturing’s performance for the past three years and prepare a report that includes a benchmarking of the company’s performance. Using the company’s last three years of financial reports, you’ve calculated its financial ratios, including the ratios of Green Hamster Manufacturing’s competitors—that is, comparable ratios of other participants in the industry—and submitted the report. Along with calculating the ratios, what else is needed for your report? Making observations and identifying trends that are suggested by the ratio analysis Identifying the factors that drive the trends in the ratios Both of the above

Answer 1

Answer:

Both of the above

Explanation:

In this exercise, your boss requires you to analyze the company's performance (Green Hamster Manufacturing) for the past three years, and prepare a report on this. It is important that you calculate its financial ratios, including those of other competitors in the industry. However, it is also important that you realize that ratios themselves do not provide a full picture. You also have to analyze why it is that the performance is this way. For this, you would need to make observations and identify trends that are suggested by the ratio analysis. You would also have to identify the factors that drive the trends in the ratios.