Ratio Analysis Is One Tool Management May Use to Examine

question 35

Essay

Ratio analysis is one tool management may use to examine a firm's profitability and risk.Another tool often used by management are pro forma financial statements.
Required:
a. Describe the purpose of pro forma financial statements.
b. Describe how pro forma financial statements may be constructed.

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Definitions:

Absolute Differences

The minimum amount by which two sensory stimuli can differ for an individual to perceive them as different.

Gustav Fechner

A German philosopher, physicist, and experimental psychologist who founded psychophysics, studying the relationship between the physical properties of stimuli and the sensations they produce.

Psychological Sensation

The subjective experience or perception of a stimulus through the mind's interpretation of sensory information.

Physical Stimulus

A tangible or material factor that can prompt a physical reaction in an organism.