Evaluating the financial health of a firm is critical not on

Evaluating the financial health of a firm is critical not only for management\'s understanding of the business but also for outside investors and creditors. Evaluating a company has a specific set of criteria and processes from both an accounting and a financial standpoint. Discuss the reasons behind these consistent procedures and why they have been implemented. Considering this please address the following prompts in your discussion Why is it necessary to have a consistent method of financial analysis? Is it unethical to deviate from industry standards when analysis is concerned? . .

Solution

Answers:

Part A: The concept of consistency method means a method applied consistently in future , it is important as it provides easy comparability and easy to evaluate the results. Once you adopt for principle or method continue to follow in future as it bring efficiency in work and also provides better results . one can change the methods if there is a valid reason for which they want to change .

Part B: Yes, it is unethical to deviate from industry standards when analysis is concerned as basic assumption of analysis is that the industry standards are to be maintained and also it makes the analysis more informative and comparable with the other companies in the same industry.