Financial Analysis – Exercises
1. What ratios are useful in analysing a company’s profitability?
a. relative to sales
b. relative to the amount invested in the company
2. What two ratios are commonly used to assess a company’s liquidity? What is a
significance of each of these?
3. What five ratios are commonly used to evaluate how efficiently a company is using
its assets?
4. What ratios do investors often use when analysing a company’s performance?
5. If a company’s gross margin increases from one year to another by 5% what are the
possible reasons for this?
6. If a company has a liquidity ratio of less than 1 what does this signify?
7. Compare and contrast two companies using ratio analysis, trend analysis and
common size analysis.
a) Profitability
b) Liquidity
c) Efficiency
d) Investment/capital gearing
A86045 Accounting & Financial Reporting
Paul G. Smith