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Comparative financial statements provide analysts with significant information about trends and relationships over two or more years.

  • Liquidity ratios. Measure the ability of the enterprise to pay its debts as they mature.
  • Activity (or turnover) ratios. Measure how effectively the enterprise is using its assets.
  • Profitability ratios. Measure management's success in generating returns for those who provide capital to the enterprise.
  • Coverage ratios. Measure the protection for long-term creditors and investors.
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Q: Objectives of comparative financial statement analysis?
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