Discuss the limitations of ratio analysis
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Discuss the limitations of ratio analysis
Read the following case study, and reply to three question: each question 175 word at least
You have just been promoted from vice president of marketing of BrainDrain Corporation to president and CEO! That’s the good news. Unfortunately, while you know marketing like the back of your hand, you know next to nothing about finance. Worse still, the “word on the street” is that BrainDrain is in danger of failure if steps to correct large and continuing financial losses are not taken immediately. Accordingly, you have asked the vice president of finance and accounting for a complete set of accounting statements detailing the financial operations of the company over the past several years.
Recovering from the dual shocks of your promotion and feeling the weight of the firm’s complete accounting report for the very first time, you decide to attack the problem systematically and learn the “hidden secrets” of the company, statement by statement. With Mary Pruitt, the firm’s trusted senior financial analyst, by your side, you delve into the accounting statements as never before. You resolve to “get to the bottom” of the firm’s financial problems and set a new course for the future—a course that will take the firm from insolvency and failure to financial recovery and perpetual prosperity.
- Describe the 3 basic accounting statements. What types of information does each provide that can help you evaluate the situation?
- Which of the financial ratios are likely to prove to be of greatest value in identifying problem areas in the company? Why? Which of your company’s financial ratios might you expect to be especially poor?
- Discuss the limitations of ratio analysis.
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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