Discuss the usefulness of ratio analysis in the investigation of financial statement fraud.
Use specific examples to explain the role of ratio analysis in assessing the risk of financial statement fraud in the pharmaceutical industry.
Analysis should include the recording of research and development expenses in the financial statements.
Here are some resources to help you formulate answers to the questions.
Ratio analysis is a tool used to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous year numbers, other companies, the industry, and the economy. The purpose is to assess the performance of the company in relation to other entities.
"There are many ratios that can be calculated from the financial statements pertaining to a company's performance, activity, financing and liquidity. Some common ratios include the price-earnings ratio, debt-equity ratio, earnings ...
Details how ratio analysis can be used to investigate financial statement fraud. Gives links to examples.