A financial ratio by itself tells us little about a company because 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. In time trend analysis, you find the ratios for the company over some period, say five years, and examine how each ratio has changed over this period. In peer group analysis, you compare a company's financial ratios to those of its peers. Why might each of these analysis methods be useful? What does each tell you about the company's financial health?
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