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Question 5.RQ.1: What is the major advantage of the cause-and-effect ratio sy...

What is the major advantage of the cause-and-effect ratio system?

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This approach not only details a company’s financial problems, but it also determines the underlying causes. Knowing the cause lets the analyst recommend the appropriate solution. For example, one does not cure a cold with a box of tissue—instead one must attack the underlying virus. In correcting a company’s financial problem, knowing the cause rather than
just the symptoms provides direction for a solution.

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What is the purpose of an industry analysis? ...

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An industry analysis lets the analyst show where a...
Question: 5.KC.6

When conducting an analysis of financial statements, it is important to take corrective action by attacking the a. Underlying cause of the problems. b. Symptoms of the problem as indicated by the effect ratios. c. Profit ratios first and foremost. d. Bankers. ...

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Which is not generally a problem with using industry averages? a. A company may be a conglomerate. b. The company may use different accounting procedures than the industry. c. Industry data is not available at year-end. d. All of the above. ...

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A company with ratios that match the industry average is in _______ shape. a. Poor. b. Average. c. Great. d. Impossible to tell. ...

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Of the sources of industry data presented in the manual, the two sources that not only provide the industry averages, but also provide a “size” breakdown of the averages are a. “Risk Management and Associates Annual Statement Studies” and “The Almanac of Business and Industrial Financial Ratios.” ...

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Select the statement that is most true. a. A complete analysis of a company can be accomplished by comparing company ratios to industry averages. b. A complete analysis of a company can be accomplished by examining a company’s current year ratios to past years. c. A complete analysis of a company ...

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A(n) _______ analysis lets the analyst know how a company compares to similar companies during the most recent time period. a. Time series. b. Industry. c. Ratio. d. Time series and an industry. ...

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