Financial ratios are effective in determining the performance of a company. Nevertheless, financial ratios may also provide erroneous indications when comparing the financial performance of two or more organizations. Some of the factors that may contribute to erroneous indications include the fact that different industries have different parameters. For instance, comparing the financial performance of companies from banking and motor vehicle sectors may result in providing the investors with misleading information about one of the sector. Therefore, it is imperative to ensure that the financial ratios consider factors such as the industry, company size, number of employees, and the duration the firm has been operating in the market. In addition, some financial ratios do not put into consideration the external and internal environments that may influence the performance of a firm. Using profit margins may provide the investors with information about the profitability of a firm although the yields may not correspond with the margins.
TFC will need to use debt to finance its expansion. Tersely, the need to maintain control of the firm means that the firm needs to use debt. Using equity means that some shareholders will control some aspects of the firm. On the other hand, the firm will also need to ensure that it can manage the cost of debt. Debt may be expensive for TFC because of the associated interest rates. However, using debt to expand the business means that the organization will not be liable for paying taxes unlike a company that uses equity for expansion purposes. Therefore, the best way of expanding the business is through debt. Moreover, the owners of the company will maintain its control and will not be influenced by external parties.
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