Explain how using financial ratios can help spot these tricks. 2. Why is it important to analyze profitability, specifically focusing on return on investment? Invoke the breakdown of ROI in thinking about your response.
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1. Name and explain three tricks that management can play to manage earnings. Explain how using financial ratios can help spot these tricks.
2. Why is it important to analyze profitability, specifically focusing on
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- “A company can be profit rich but cash poor” critically evaluate this statement focusing on the various financial ratios that can guide you in coming to such a conclusion.You are asked to briefly answer the following questions:Profitability ratios are a set of ratios that indicate how profits relate to sales and the size of a company's capital, and this category includes various ratios such as: Gross Profit Margin Ratio, Net Profit Margin Ratio, Return on Assets Ratio and Return on Equity Ratio of funds. One of the top executives at the company where you work is asking for your help in understanding the following:1. How the above efficiency indicators are calculated.2. The company decided to pay cash to suppliers to achieve better purchase prices. What is the effect of this fact on the value of the aforementioned efficiency indicators?3. Could (beyond the above fact) be affected in any way positively the figures in question for the company where you work?Please see below. Do you agree with this opinion? Why or why not? Please include an explanation. All of the financial ratios are important to determine a company's stability and to gage how well the company is doing or not. With that being said, if I were a financial user and wanted to know if I should invest in a company or not the profitability ratio would be the most important to me. There are many different profitability ratios such as earnings per share, price earnings, gross profit rate, asset turnover etc. Each of these can be used to determine a company's income or lack of income and can be used to gage its ability to obtain its debt, which can help a financial user make the choice of whether to invest or not.
- Which of the following is true about earnings management? Group of answer choices A. It works outside the constraints of GAAP B. It works outside the constraints of GAAP and t tries to improve stakeholder’s views of the company’s financial position. C. It tries to improve stakeholder’s views of the company’s financial position. D. It works within the constraints of GAAP and it tries to improve stakeholder’s views of the company’s financial position.Describe and justify why you would use the following ratios as an analyst to evaluate the performance of a company. Profitability Ratios Liquidity Ratios Gearing Ratios Investment Ratios1. What are some of the tests of a sound or healthy long-term financial position? 2. Give some indications of managerial efficiency in the use of company resources. 3. What are the most commonly used techniques in the analysis and interpretation of financial statements? 4. What are the steps involved in using trend percentages in financial analysis? 5. Distinguish between horizontal and vertical analysis of financial statement data 6. What is the basic objective in looking at trends in financial ratios and other data? 7. Define trendpercentages 8. Discuss the steps in analyzing financial statements using trend percentages. 9. In financial statement analysis, what is the basic objective of observing trends in data and ratios? Suggest some other standards of comparison. 10. Distinguish between trend percentages and component percentages. 11. Which would be better suited for analyzing the change in sales over a term of several years? 12. Nets sales of the Premiere General Store have been…
- When converting dollar amounts on our financial statements to percentages for vertical analysis, what is it that makes this an easier way to compare companies to each other? A It provides a way for outside stakeholders to understand the numbers better in an easier format B It forces us to look closer at our financial statements to ensure we don't have missing amounts C It allows us to compare things based on growth or decline easier than comparing dollar amounts that could be vastly different values D It allows the analysis of numbers too large to comprehend by most stakeholdersWhy is it important to analyze profitability, specifically focusing on return on investment? Invoke the breakdown of ROI in thinking about your response.Which of the following statements is false regarding the abnormal earnings approach to valuation? Multiple Choice The method uses earnings and equity book value numbers as direct inputs in the valuation process. The method uses the cost of capital as a fundamental economic benchmark. This approach produces results that are generally equivalent to the free cash flow model. This approach is based on the notion that the value of a company is driven primarily by the level of earnings.
- Financial Statement Analysis tells you if your company is on the right track. Are you growing, making more money? Find out why the Liquidity, Leverage, Profitability, and Cash Flow Ratios are so important to a company's survival? List at least '1' for each category, describing how it is calculated, and what it means.You have been asked by your CEO to evaluate, analyse and calculate commonly used ratios relating to a company’s profitability, liquidity, solvency and management efficiency. Requirement: b. Explain how do analysts use ratios to analyse a firm’s leverage? Which ratios convey more important information to a credit analyst those revolving around the levels of indebtedness or those measuring the ability to service debt? What is the relationship between a firm’s level of indebtedness and risk? What must happen in order for an increase in leverage to be successful? Discuss and illustrate all your answer.Which of the following statements is true? a. Determining how day-to-day financial matters should be managed is not a function of financial managers. B. The goal of the firm is to maximize market share. C. Working capital management refers to identifying productive long-term assets the firm could acquire to maximize net benefits. D. Capital budgeting refers to identifying productive long-term assets the firm could acquire to maximize net benefits.