Question

In: Finance

If you are performing an analysis of a company, would you only look at the last...

If you are performing an analysis of a company, would you only look at the last year's performance ? Please explain your answer. Yes or no is not sufficient.

Solutions

Expert Solution

NO, I will not just by looking at the last year performance because it will not be providing me with much information rather than I would be looking at few more years like past five years informations and it will be providing me with the trend of the business performance because once the trend is being established, the company are more likely to follow those trends for the the similar economic cycles, so I will be trying to look at a few more years of performance of the business in order to find out a trend and I will be trying to compare the performance of the company in order to derive whether the company is significant outperformer or under performer in the entire industry and hence I will be likely to to go for more years of observations in the past in order to find out a significant trend in various performance metrics like liquidity, solvency along with profitability of the company.


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