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    Ratio analysis of Yahoo

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    Please select a company of your choice and perform ratio analysis on it's financial results. Use the latest data available. Use the ratios that we have covered in this course. Submit only the summary of your work, not to exceed two to three pages. Include in your submission the name of the company, but DO NOT send downloaded files.

    Use all common ratios in upper level finance.

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    Solution Preview

    A ratio is nothing more than a simple division of two numbers. Often numbers by themselves do not convey anything until they are related. It needs a contextual reference.

    In financial analysis, we need qualitative information and try to read between the numbers. We have to ask all the right questions. Over the years, there are some ratios, which have become more popular and handy for rule of thumb analysis of financial statements. Our purpose in this note is not deride them but to advice the reader to use them properly to derive the correct results.
    Ratio analysis can also help us to check whether a business is doing better this year than it was last year; and it can tell us if our business is doing better or worse than other businesses doing and selling the same things. In other words it helps in inter firm and intra firm comparison.
    We can use ratio analysis to try to tell us whether the business

    1. Is profitable
    2. Has enough money to pay its bills
    3. Could be paying its employees higher wages
    4. Is paying its share of tax
    5. Is using its assets efficiently
    6. Has a gearing problem
    7. Is a candidate for being bought by another company or investor

    Though ratio has its advantage but it has following limitations:

    1. Accounting Information
    * Different Accounting Policies
    The choices of accounting policies may distort inter company comparisons.

    * Creative accounting
    The businesses apply creative accounting in trying to show the better financial ...

    Solution Summary

    This solution provides a thorough financial analysis of Yahoo and also give recommendations.