Name: SALAZAR, Emmalyn Joyce U.

Date: January 16, 2023

Section: BS Entrep 3-1

Financial Management
Activity No. 4

Direction: Answer the following questions in essay form with at least four sentences per
answer. (Any format will do)

1. Explain the importance of financial analysis to businesses.

● Financial analysis is essential to operating a successful firm. When done

properly, financial analysis helps a company more accurately pinpoint operational
concerns. The company can then implement corrective measures to lessen or
minimize the problematic aspects of the business. The quick ratio, net income,
return on equity, and other factors are all necessary for the business to operate
well. Additionally, a financial analysis also shows where your business stands in
comparison to its industry, giving you the ability to monitor the competition.

2. Differentiate corporate financial analysis from investment financial analysis. Expound.

● Corporate financial analysis concentrates more on analyzing a company's

financial standing and stock market value. It is a branch of finance that examines
how companies handle capital structures, accounting, and investment decisions.
Thus, it is concerned with profitability, liquidity, and valuation. On the other hand,
investment financial analysis is the process of assessing an investment's
profitability and researchers' opinions to determine how to allocate funds
between various investment vehicles. In the end, it seeks to assess how well a
specific investment fits into a portfolio.

3. Explain the advantages and disadvantages of ratio analysis.

● For the advantages, ratio analysis helps in better decision-making by providing a

bird's-eye view of an operation's strengths and weaknesses. The study also
illustrates how the organization is expanding and improves in management
decision making. In addition to the advantages, ratio analysis has certain
limitations too. Ratio analysis only provides data that can be used to guide
decisions. It's only a step in the process to reach the solution but not the answer
for the solution.
4. As a future professional/business owner, which type of financial analysis would you
like to use when it comes to analyzing an investment? Explain your answer.

● As a future professional/business owner, I will use fundamental analysis when it

comes to analyzing an investment because it helps in predicting the long-term
trends in the market. With fundamental analysis, you can predict future share
price objectives by using financial data about a firm. By looking at a company's
financial performance, potential growth possibilities, the strength of its brand
name, and the quality of the management team. You'll be in a better position to
decide if a stock is underpriced, fairly priced, or overvalued.