Financial ratios are the principal tool of financial analysis. Ratios standardize the financial information of firms so comparisons can be made between firms of varying sizes. Choose two firms in the same sector; locate their current financial information both in terms of current financial statements and stock market prices. With the information:
- How liquid are the firms
- Are the firm's managers generating adequate operating profits on the company's assets
- How are the firms financing their assets?
- Are the firm's managers providing a good return on the capital provided by the shareholders
- Are the firms’ managers creating shareholder value
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