Question

Ratio analysis:___________.

a) Includes estimating the net present value of the investment opportunity.
b) Is generally adequate to fully assess an investment’s expected return.
c) Requires cash flow estimates for the investment’s entire expected holding period.
d) Serves as an initial evaluation of the adequacy of an investment’s expected cash flows.

Answer 1

D. Serves as an initial evaluation of the adequacy of an investment's expected cash flows.

Step-by-step explanation:

Ratio analysis serves as an initial evaluation of the adequacy of an investment's expected cash flows.

Ratio analysis can be defined as the analysis of different pieces of financial information in the financial statements of a business.

Ratio analysis is used to get insight about the financial wellbeing of a business. It is used by analysts to determine various aspects of a business, such as its profitability, liquidity, and solvency.