Compare the financial ratios with each of the preceding three (3) years (e.g. 2014 with 2013; 2013 with 2012; and 2012 with 2011). Compare the calculated financial ratios against the industry benchmarks for the industry of your assigned company.

Interreting financial results| Business & Finance homework help

It is crucial to take into account the market and industry conditions in which the financial ratios were compared between years. You can then compare the performance of a company to that of its competition and determine whether changes can be attributed externally or to managerial decisions.

For example, if we were looking at a hotel chain’s liquidity ratios from 2014 to 2013, it could be helpful to look at overall trends in travel demand for those two years—for instance, did the number of travelers increase or decrease? Investors can see a wider picture and be able to assess the impact of certain events on their company. If we compare the financial figures for an auto company in 2012 with 2011, we may want to look at changes in oil prices over that period. They could impact profitability.

A useful tool for measuring performance is to compare financial ratios against industry benchmarks. In this case one should take into account both industry averages as well as top performers so that they can measure their assigned company’s performance against others in its specific field. Markets are always changing so it’s important to compare the latest figures in order to get a clear picture of their company against other firms.

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