Ratio analysis is equally effective in identifying either winners or losers.

Question

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After we have computed the appropriate ratio, we must compare our firm's results to the achievement of similar firms in the industry, as well as to our own firm's past performance. Even then, this number-crunching process is not always adequate, because we are forced to supplement our financial findings with an evaluation of company management, physical facilities, and numerous other factors. Ratio analysis will not uncover gold mines or train wrecks.

Ratio Analysis Is Equally Effective in Identifying Either Winners or Losers