Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 17

For the following questions, circle the best response.

Many financial analysts substitute one amount for another in making ratio analysis comparisons in order to better achieve intercompany or company-to-industry data comparability. Which of the substitutions described here would not achieve better data comparability (for the ratio indicated) under any situation?

a. Cost of goods sold for sales—in the numerator of the inventory turnover ratio.

b. Cost of plant and equipment for net book value—in the numerator of the plant and equipment turnover ratio.

c. Expected future earnings per share for current earnings per share—in the denominator of the price/earnings ratio.

d. Average net assets for average total assets—in the denominator of the return on investment ratio.

Step 1 of 2

The correct option is.