Which of the following regarding financial statement analysis is NOT correct?
A) According to the Du Pont identity, ROE is affected by operating efficiency, asset use efficiency, and financial leverage.
B) It is straightforward to calculate the market value based measures of firm performance using financial statements prepared according to GAAP.
C) Asset management ratios measure the intensity and efficiency of asset use.
D) For common size statements, we divide asset and liability accounts by total assets and statement of comprehensive income accounts by sales.
E) An increase in a firm's net fixed assets is considered to be a use of cash.

Question

Quizplus · Accepted Answer

Market value-based measures of firm performance, such as market capitalization or price-to-earnings ratios, cannot be directly calculated from financial statements prepared according to GAAP (Generally Accepted Accounting Principles) because these measures require market price data, which is external to financial statements.

Which of the Following Regarding Financial Statement Analysis Is NOT