Ratios are used as tools in financial analysis
A) instead of horizontal and vertical analyses.
B) because they may provide information that is not apparent from inspection of the individual components of the ratio.
C) because even single ratios by themselves are quite meaningful.
D) because they are prescribed by IFRS.

Question

Quizplus · Accepted Answer

Ratios provide information that is not apparent from inspection of the individual components of the ratio. They allow for comparisons between different time periods, companies, or industries. Horizontal and vertical analyses are also useful tools in financial analysis, but may not provide as much insight as ratios. The use of ratios is not prescribed by IFRS, but they are widely used in financial reporting and analysis. Additionally, a single ratio by itself may not be meaningful without context and comparison to other ratios or benchmarks.

Ratios Are Used as Tools in Financial Analysis