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A financial ratio by itself tells us little about a company since financial ratios vary a...

A financial ratio by itself tells us little about a company since financial ratios vary a great deal across industries. There are two basic methods for analyzing financial ratios for a company: time trend analysis and peer group analysis. Why might each of these analysis methods be useful? What does each tell you about the company’s financial health?

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Time trend analysis of financial ratio tells us about the historical trend of various ratios of the company in order to arrive at performance analysis of the company.

Peer group analysis of financial ratio would tell about the the performance of the company with comparison to their peers as it compares the overall financial ratios of a company with others in the same industry.

Each of these ratios analysis tells about the past performance and trends of the the companies financial ratios and standing of a company with comparison to its peers.

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