Financial Interretining Results | Business & Finance homework help
Comparing financial ratios from different years is important. It’s also worth considering the industry or market conditions which may have changed over the time. By doing this, it is possible to get an accurate picture of how the company compares to other companies and to determine if any performance changes can be attributed either to management or external factors.
For example, if we were looking at a hotel chain’s liquidity ratios from 2014 to 2013, it could be helpful to look at overall trends in travel demand for those two years—for instance, did the number of travelers increase or decrease? This broader view allows investors to evaluate not just what has happened in the company, but why. We might also want to compare 2012 financial results for automotive companies with 2011. These changes could have an impact on profitability.
Another useful way to evaluate performance is to compare financial ratios with industry benchmarks. In this case one should take into account both industry averages as well as top performers so that they can measure their assigned company’s performance against others in its specific field. It is also important that you use up-to date figures for these comparisons, as markets change all the time. This will give you a true picture of your firm’s performance against others in its field.