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Company Ratios

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Two financial managers are in a heated discussion concerning the importance of trend analysis. Manager A states that all he is interested in are the absolute levels of the firm's ratios and their comparisons to industry averages, while Manager B states that he is just as interested in a trend analysis of the firm's ratios. Discuss. Include in your discussion why both managers might want to include "benchmark" comparisons, whether you would expect industry averages to be "static" or "dynamic," and whether the emphasis placed on certain ratios would be dependent on the nature of the industry analyzed. Provide support (rationale) for your responses.

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This solution discusses company ratios.

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Both Manager A and Manager B have a good point. You need to know benchmarks in the industry and compare it to the firm's ratio and you also need to know how the firm is doing over the years as to whether they are doing better or worse than in previous ...

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