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Kevin is considering investing in a business - HSC - SSCE Business Studies - Question 12 - 2018 - Paper 1
Question 12
Kevin is considering investing in a business. To help Kevin determine which business to invest in, he should consider comparative ratio analysis because A. cash fl... show full transcript
Worked Solution & Example Answer:Kevin is considering investing in a business - HSC - SSCE Business Studies - Question 12 - 2018 - Paper 1
Step 1
To help Kevin determine which business to invest in, he should consider comparative ratio analysis because
Answer
Comparative ratio analysis is especially valuable because it allows Kevin to evaluate similar businesses. By comparing key financial ratios, such as profitability and return on equity, he can make more informed decisions based on the performance of businesses within the same industry or market segment. This process of evaluating similar businesses provides a better context for understanding financial health and investment potential, making option C the most appropriate choice.