advantages, sustainability of that advantage, and if products are meeting needs.
As part of its financial statement analysis, a company is reviewing whether its profit
margin is increasing or decreasing over time.
Which step of financial statement analysis is the firm involved in? - Answer✔️✔️-Step 4:
Using financial statements to analyze current profitability, growth, and risk
Step 4 asks about the rate of return from assets, rate of return for common equity
shareholders, and whether profit margin is increasing or decreasing over time.
A potential investor is identifying whether or not the company belongs to an industry that
includes a large number of firms selling the same product or only a small number of
firms selling unique products.
Which step of financial statement analysis is the potential investor involved in? -
Answer✔️✔️-Step 1: Identifying the economic characteristics and competitive dynamics
of the industry in which the firm participates.
Step 1 involves asking about dynamic forces driving competition and how technological
change impacts competitive advantage.
As part of its financial statement analysis, an auditor is trying to determine whether its
client has selected a specific certain accounting method simply to make the firm appear
more profitable or less risky than economic conditions otherwise suggest.
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