Why is trend analysis useful in analyzing ratios?

  • Does a rule-of-thumb approach to ratio analysis offer any value to the financial manager, or do these tend to favor the financial markets more (e.g., 2-1 current ratio rule or 50% debt/equity rule)?
  • Either way, of what value are these to either stakeholder (Financial Manager or Banker, or how about the investor)?
  • Scan Chapter 4 & 5
  • DQ2
  • Refer to the Trend Analysis resources – Trend & Benchmarking Analysis& Trend Analysis before responding to the questions.
    • Why is trend analysis useful in analyzing ratios?
    • Provide an example of Trend Analysis to explain your response.
    • Scan Chapter 4 & 5
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