Chapter 6 Analysing and interpreting financial statements

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Chapter 6 Analysing and interpreting
financial statements
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Financial ratio classification
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Ratios benchmarks
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Profitability ratios
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Efficiency ratios
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The main elements comprising the ROCE ratio
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Liquidity ratios
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Gearing ratios
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The effect of financial gearing
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Investment ratios
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Average dividend yield ratios for businesses in
a range of industries
Source Constructed from data appearing in the
Financial Times, 23/24 July 2005
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Average price/earnings ratios for businessesin a
range of industries
Source Constructed from data appearing in the
Financial Times, 23/24 July 2005
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Graph plotting current ratio against time
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Limitations of ratio analysis