Financial analysis can be defined as the process of assessing the financial condition of a firm. It can be very useful in understanding the financial position of a company. There are varieties of ratios that can be used for this purpose but each has it benefits and limitations.
Select two ratios you think are the most valuable when trying to understand the financial condition of a company and explain why you have selected them. Then use those ratios to assess two publicly traded US companies listed on the NASDAQ stock market.
What do these ratios tell you about how investors assess the future prospects of these companies?
Readings Required:
Chapter 4 in Foundations of Finance – Evaluating a Firm’s Financial Performance
Benlemlih, M., & Cai, L. (2019). Corporate environmental performance and financing decisions. Business Ethics: A European Review, 29(2), 248-265.
Willows, G. D., & Rockey, J. A. (2018, May-Nov). Share price reaction to financial and integrated reports. South African Journal of Accounting Research, 174-188. https://doi.org/10.1080/10291954.2018.1514141
Drake, P. P. (n.d.). Financial ratio analysis. http://educ.jmu.edu/~drakepp/principles/module2/fin_rat.pdf
