Boston Beer Company Essay Example | Topics and Well Written Essays - 2500 words

Boston Beer Company - Essay Example The trend all these ratios have over time is analyzed to check if they are deteriorating or improving (Steffy, Zearley & Strunk, 1974). Comparative valuations of different companies belonging to the same sector are also carried out in order to see how they stack up, and also to get an idea of their comparative performance (Sen, 2008). Ratio analysis is a very important factor of fundamental analysis (Johri, 2010). Although there is abundance of financial ratios, investors are mostly familiar with a few key ratios, especially the ones that are comparatively easy to calculate. A few of these ratios are the current ratio, the debt-equity ratio, return on equity, the price/earnings ratio and the dividend payout ratio. (Muhammad Arif Ghani, 2007) Most companies have some values, for a specific ratio, that have a certain range. A company may be assumed to be grossly overvalued or undervalued depending on the ratio figured out provided the ratio does not fall in that range. Keeping in view the fact that a ratio which is acceptable for one industry may be considered as much more high in another, therefore the ratios are generally compared for those companies which are in operations in the same sector. A good example may be; companies in utilities sectors typically have high debt-equity ratios, but the same ratio may be considered as unsustainably high for a technology company (Palepu, Bernard & Healy, 1996). Ratio analysis can be very useful in providing an early warning of a potential deterioration or improvement in the financial performance or situation of a company. To find for any such hints, the experts and analysts does engage in extensive ratio calculations of the financial data in quarterly financial reports of a company (Cadle, Paul & Yeates, 2010). Generally, successful companies show solid ratios in all the areas, and a small hint of weakness in a single area may