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4 cards from this section. Quick, good the night before a test.
What is the first limitation of ratio analysis?
Think about what kinds of factors analysis usually considers.
Explain what window dressing is.
Consider how companies might portray themselves in a favorable light.
What is a critical limitation of ratio analysis?
Think about what types of information are often measured.
True or False: Historical data is always reliable for predicting future performance.
Consider how market conditions can shift over time.
A company shows a significant current ratio improvement over three years. However, market share is declining. Discuss the implications of this situation.
Focus on both the financial data and what it means for the company's health in the market.
If two companies in different industries had the same debt-equity ratio, can you accurately assess their financial health? Why or why not?
Think about differences in financing structures across industries.
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