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Marcella is preparing a note for her conversation with Sally about the ratio analysis. Marcella wants Sally to understand the limitations of ratio analysis in relation to her ratio review of Albert Co., Basil Co., and Charlie Co. PLEASE FILL THE ANSWER IN THE 2ND TABLE BY REVEIEEW THE FIST TABLE AND PUT THE FORE LIMITATION IN 2 TABLE WHICH ONE ARE FOUR LIMITATIONS PUT X FRONT OF THAT ONE LIMITATION IN YEELOW COLOUMN

Appendix ll: 2021 ratio data for Albert Co., Basil Co., and Charlie Co. Albert Co. Basil Co. Charlie Co. 1.4 0.9 1.8 21.2 15.6 10.5 311.5 Asset turnover Dividend payout ratio % Free cash flow ('000s) Interest coverage Inventory days Price earnings ratio 420.2 3.4 (50.9) 2.5 73.8 6.2 62.1 26.9 91.2 26.1 26.4 Mi 12 Note to Sally When using ratios, it is important to remember that there are limitations in using this type of analysis. Below, I have identified four additional considerations for you to take into account when making your decision. (Select four considerations by placing 14 an "X" next to the four MOST valid items.) 15 16 A B FOUR most valid 17 1 Considerations (X) 2 You should investigate more than three companies as 18 possible options. 3 Industry data would be helpful as all three of the companies being assessed may be poor choices to invest in. 19 4 Seasonal effects should be considered for these companies. 5 The source of the information used to calculate the ratios 21 should be the company's audited financial statements. 22 6 Ratios ignore the effects of inflation. 7 Ratio analysis seldom provides the right answers on its own. 23 8 Ratios are calculated using historic information and 24 therefore may not be indicative of future performance. 25 20 e

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