A financial analyst is comparing two companies using a top-down approach. Which of the following would cause problems in the evaluation process?
A)One company's fiscal year-end is October 31, while the other company's fiscal year-end is December 31.
B)One company has been in business significantly longer than the other company.
C)Inflation has been low for several years.
D)The companies operate in different industries.

Question

Quizplus · Accepted Answer

The top-down approach involves analyzing the broader economy and industry before evaluating individual companies. If the companies operate in different industries, it complicates the comparison because industry-specific factors can significantly impact financial performance.

A Financial Analyst Is Comparing Two Companies Using a Top-Down