Discuss at least three potential issues in utilizing ratio analysis that you would share with your colleague.
DQ #1: Comparing Financial Ratios
Go to MSN Money. (http://investing.money.msn.com/investments/key-ratios) and type in a ticker symbol for a company with the first letter of your last name.
Next, complete the following:
Select “Key Ratios” on the left menu panel.
There are several categories listed for ratios. Select one “Financial Condition Ratio” and one “Management Efficiency Ratio”.
Open the Profile section on the left menu panel and you will see “Industry” is identified. Find a competitive company within that industry and compare those ratios to the ones you just found.
Examine your findings and determine whether your company outperforms its competition based on financial ratios. Identify where your firm seems to lag. Describe how your firm compares with the industry and speculate as to why you believe your firm is performing as it is.
Guided Response: Review the financial ratios provided by your classmates. Do any seem unusual? Respond to at least two classmates by sharing any reasons you can provide to explain the variance in the ratios. Support your reasons with evidence.
DQ # 2: Potential Issues in Ratio Analysis
As your text describes, ratio analysis is a common technique in financial analysis. One of your colleagues states that a thorough ratio analysis is all that is needed in considering the financial health of a company. Although you agree that ratio analysis is a helpful guide, there may be some potential pitfalls in ratio analysis.
Discuss at least three potential issues in utilizing ratio analysis that you would share with your colleague. In addition, calculate a liquidity, profitability, and efficiency ratio from your Week Six company to demonstrate your observations.
Develop a 200 – 300 word explanation supporting your findings.
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