Please respond with at least five sentences to each question
1. How can firms in some industries receive a positive response from analysts and investors with return on assets (ROA) of 1 percent, while in other industries, an ROA of 10 percent is required?
2. How would one determine the viability of a company by looking at its financial statements over a given period of time?
3. How would a period of significant inflation affect the analysis of financial statements? (historical costs)
4. In examining the financial statements of a company, you notice that inventories are carried on a LIFO basis. Why would a firm choose LIFO over FIFO?
5. Why, in finance, are cash flows, as opposed to accrual accounting, used in determining the efficacy of a project?
6. How does the use of common-sized statements increase the efficiency of the financial analyst?
The solution explains some theory questions in finance.