The use of alternative accounting methods
A) is not a problem in ratio analysis because the footnotes disclose the method used.
B) may be a problem in ratio analysis even if disclosed.
C) is not a problem in ratio analysis since eventually all methods will lead to the same end.
D) is only a problem in ratio analysis with respect to inventory.

Question

Quizplus · Accepted Answer

Alternative accounting methods can significantly affect the financial statements, which can in turn affect the ratios calculated. Even if the alternative method is disclosed in footnotes, the analyst must carefully consider the impact on the financial ratios. As a result, alternative accounting methods may pose a challenge for accurate ratio analysis, and the analyst should carefully evaluate the impact of the alternative methods on financial ratios.

The Use of Alternative Accounting Methods