financial position of a particular firm.^5 Ratio analysis may not protect the
investor from corporations that release misleading or fraudulent data, as
we have seen in recent court proceedings.
The importance of the various ratios varies with the individual circum-
stances of the firm and the major interests of the analyst. The picture of the
firm’s financial position does not emerge until the relationships of all the
germane ratios are carefully appraised. We have examined the financial
health of a firm via composite ratios such as the DuPont analysis and Alt-
man Z score. Scores were developed for all the important ratios, standard
weights were applied, and the resulting weighted average was supposed to
indicate the company’s overall financial health.
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