Indicate the changes that indicate whether it is good or bad news for a company.

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Indicate the changes that indicate whether it is good or bad news for a company.

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Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

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Given info: Information about increase/ decrease in the ratios.

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(a)

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When there is increase the profit margin ratio, the company faces a better situation and becomes a good news. This results in greater percentage of net sales towards net income.

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(b)

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When there is a decrease in inventory turnover ratio, the company has a bad news. This is because when company takes longer time to sell the inventory, there becomes inventory obsolescence.

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(c)

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When there is increase in current ratio, it becomes a good news for the company. It improves the company’s capability towards meeting short-term obligations.

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(d)

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Earnings per share misleads the user...

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