Which of the following is a potential problem of utilizing ratio analysis?
A) Trends and industry averages are historical in nature.
B) Financial data may be distorted due to price-level changes.
C) Firms within an industry may not use similar accounting methods.
D) All of the options

Question

Quizplus · Accepted Answer

All of the options listed can be potential problems of utilizing ratio analysis. Trends and industry averages are historical in nature and may not accurately reflect current market conditions. Financial data may be distorted due to price-level changes, such as inflation or deflation, making it difficult to compare data from different periods. Firms within an industry may use different accounting methods, causing inconsistencies in financial reporting and making it challenging to compare data between companies.

Which of the Following Is a Potential Problem of Utilizing