Why is comparison with industry averages helpful when analyzing financial statements? Question 9 options: a. Companies want to be average b. Serves as a base line for comparison with similar companies of larger/smaller size c. Management bonuses are based on averages d. Helpful in evaluating sales campaigns
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- Which of the following is NOT an example of a metric that companies are likely to use to measure some aspect of performance? a. Operating income b. CEO salary c. Cash flows d. Average employee tenureTRUE OR FALSE: Read each sentence carefully and determine whether the statement True or False. Write your answers in the space provided before the number. 1. Financial statement analysis uses computational and analytical techniques to evaluate the company's risks, performance, financial health, and future prospects with the objective of making economic decisions. 2. Return on asset is an operational efficiency ratio. 3. Profitability ratios measure the ability of the company's assets to generate sales. 4. Gross profit margin provides an indication of the company's average pricing policy 5. Given equal gross profit margin, the company with the lower operating income margin has higher operating expenses as a percentage of sales and has leaner operations. Written Works Below are the comparative Statement of Comprehensive Income & Statement of Financial Position of Ellane Company & Lanie Company: Statement of Comprehensive Income Ellane Company 2013 Melanie Company 2014 2013 2014 Net Sales…Time le The profitability and financial position of a firm can be judged to be improving, or deteriorating related to competitors in the industry by: OA. Measures of the past performance of the business B. Measures of both the past and current performances of the business O C. Comparing with industry average D. Rate of thumb measures Next p e
- Pick two companies in the same industry.a. Determine their DOL, DFL, and DCL.b. What effect does a change in sales have on their operating income?c. What effect does a change in sales have on earnings per share?The ratio that indicates the how well management operates the business Select one a .Liquidity Ratios b. Financial Risk Ratio c .None of the options d.perating Performance RatioAnalyze the company’s profitability and its ability to generate sufficient operating profit by using the following ratios a. Gross Profit Marginb. Operating Profit Marginc. Operating income return on investments (ROI)d. Net Profit Margin
- Net profit margin is a key measure of profitability that relates the net profits of a firm to its sales. Group of answer choices. True Falsewhich one is correct please confirm? QUESTION 25 The percentage of sales forecasting method is used by management to forecast the amount of _____________. a. debt financing needed b. profit expected for a given percentage increase in sales c. cash needed to finance future sales growth d. capital financing needed to promote marketing effortsWhen 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 stakeholders
- Title: Financial Metrics Self-Assessment Objective: To evaluate your understanding of financial metrics used to evaluate business performance. Instructions: Review the following financial metrics: Return on Investment (ROI) Residual Income Profit Margin Asset Turnover Minimum Required Income For each financial metric, answer the following questions: ● Whatisthedefinitionofthefinancialmetric? ● Howisitcalculated?An analyst who is interested in assessing a company’s fi nancial position is most likely to focus on which fi nancial statement? B . Income statement.Profitability earning is a real barometer to measure the Select one: O a. Sales of business firm O b. Effectiveness of business firm O c. None of the options O d. Cost of business firm O e. Efficiency of business firm