The most effective method of directly evaluating the financial performance of a

Question

The most effective method of directly evaluating the financial performance of a firm is to compare the financial ratios of the firm to: those of other firms located in the same geographic area that are similarly sized. the average ratios of the firm’s international peer group. the average ratios of all firms within the same country over a period of time. those of the largest conglomerate that has operations in the same industry as the firm. the firm’s ratios from prior time periods and to the ratios of firms with similar operations Which one of these equations is an accurate expression of the balance sheet? Stockholders’ equity Assets Liabilities Stockholders’ equity Assets + Liabilities Assets Liabilities Stockholders’ equity Liabilities Stockholders’ equity Assets Assets Stockholders’ equity Liabilities The financial statement summarizing a firm's accounting performance over a period of time is the: tax reconciliation statement. statement of cash flows. statement of equity. income statement. balance sheet.

Explanation / Answer

              The firm’s ratios from prior time periods and to the ratios of firms with similar operations

              Reason: The best measure of firm’s performance can be known by comparing with its own past            performance. By this, relative progress or decline, relative amounts and percentage change of quantitative aspects can be known.

Further performance of the form can be evaluated by comparing with the financial ratios of a similar firm operating in similar conditions and having a similar capital structure

               Ans: Stockholders’ equity Assets Liabilities

               Reason: Equation of balance sheet is given by : Stockholders equity + Liabilities = Assets

               It can be rearranged as Stockholders equity=Assets-liabilities

               An income statement is a financial statement that measures a company's financial performance          over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year.

Also known as the "profit and loss statement" or "statement of revenue and expense."

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