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Questions and Answers
What is the main focus of financial analysis using ratio analysis?
What is the main focus of financial analysis using ratio analysis?
- Assessing employee performance
- Identifying potential tax liabilities
- Forecasting future economic trends
- Evaluating the profitability and financial position of an entity (correct)
What does the Du Pont analysis primarily focus on?
What does the Du Pont analysis primarily focus on?
- Return on Equity (ROE) (correct)
- Operating Cash Flow (OCF)
- Net Present Value (NPV)
- Earnings per Share (EPS)
Which financial statements are mainly used as the basis for financial analysis?
Which financial statements are mainly used as the basis for financial analysis?
- Cash Flow Statement and Trial Balance
- Income Statement and Statement of Retained Earnings
- Balance Sheet and Profit and Loss Account (correct)
- Statement of Financial Position and Statement of Comprehensive Income
Which type of ratios are also known as Short-term Solvency Ratios?
Which type of ratios are also known as Short-term Solvency Ratios?
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Study Notes
Financial Analysis using Ratio Analysis
- The main focus of financial analysis using ratio analysis is to evaluate a company's performance and financial health.
Du Pont Analysis
- The Du Pont analysis primarily focuses on return on equity (ROE) and its decomposition into three components: profit margin, asset turnover, and financial leverage.
Financial Statements used for Analysis
- Financial analysis is mainly based on three financial statements: the Balance Sheet, the Income Statement, and the Cash Flow Statement.
Short-term Solvency Ratios
- Liquidity ratios are also known as Short-term Solvency Ratios, as they measure a company's ability to meet its short-term obligations.
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