discussion 7 - be expressed between items in the same...

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The numbers in financial statements are not very useful unless we study their trend over time and their relationships with other numbers in the same set of financial statements. Therefore, we often perform different types of analyses on the financial statement numbers. Two such commonly used analyses are horizontal analysis and vertical analysis. Ratios are relationships between different items in the financial statements. Investors often examine these relationships to understand the liquidity, profitability, and solvency of a company. Ratios can
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Unformatted text preview: be expressed between items in the same financial statement (e.g., between two items in a balance sheet or two items in an income statement), or between items in two different financial statements (e.g. between total assets and total revenues, net income and total assets, etc). By examining the relationships that may exist between two items in the financial statements and observing such relationships over a period of time, conclusions can be drawn about the performance and financial health of a company....
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