Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Textbook Question
Chapter 4, Problem 4RQ
What are the limitations of industry average ratios? Discuss briefly.
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explain the considerations when comparing a firm's ratio with industry average
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From the following:
What is the industry average price–earnings ratio?
What is Ragan’s price-earnings ratio?
And Comment on any differences and explain why they may exist.
Chapter 4 Solutions
Foundations Of Finance
Ch. 4 - Describe the five-question approach to using...Ch. 4 - What are the limitations of industry average...Ch. 4 - What is the difference between a firms gross...Ch. 4 - Prob. 9RQCh. 4 - Prob. 1SPCh. 4 - Prob. 2SPCh. 4 - Prob. 3SPCh. 4 - (Price/ book) Chang, Inc.s balance sheet shows a...Ch. 4 - Prob. 5SPCh. 4 - (Ratio analysis) The balance sheet and income...
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- when comparing a firm's ratios to an industry, is it bad to he below average? explain your answer with an examplearrow_forwardWhat does a relatively high ratio compared with those of competitors in the same industry indicate?arrow_forwardWhat is the difference between the ratios that use the market price and the other ratios? Why might you get a different picture about firm performance from the different ratio types? Describe a specific scenario where this might occur.arrow_forward
- how the output of horizontal analysis and vertical analysis can be compared to industry averages and/or competitive companies.arrow_forwardIs it good, fair or bad if price earning ratio is higher than industry average in terms of cross-sectional evaluation?arrow_forwardWhich financial ratios would you recommend to evaluate a company's solvency? Once these ratios are computed, what do you recommend comparing them to?arrow_forward
- Give typing answer with explanation and conclusion Financial analysis is more meaningful if the ratios can be compared to an appropriate benchmark such as Select one: a. Industry averages b. Economic industry sector c. Changes over time d. All of the options are appropriate benchmarksarrow_forwardHow might (a) seasonal factors and (b) different growth rates distort a comparative ratio analysis? Give some examples. How might these problems be alleviated?arrow_forwardCalculate the projected price/earnings ratio and market/book ratio. Do these ratios indicate that investors are expected to have a high or low opinion of the company?arrow_forward
- What is the market price book value with industry averages 4×arrow_forwardProvide an Market Performance Ratio analysis based on P/E, ROE and D/E.arrow_forwardHow might (a) seasonal factors and (b) different growth rates distort a comparative ratio analysis? Give some examples. How might these problems bealleviated?arrow_forward
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