Which of the following is the most serious limitation to financial statement analysis of publicly traded companies?
A)Some companies do not use GAAP.
B)Inflation can distort comparisons between years.
C)Some companies report nonoperating items such as extraordinary gains and losses,while others do not.
D)Different industries use different account names.

Question

Quizplus · Accepted Answer

Inflation can distort comparisons between years as it affects the purchasing power of money, making it difficult to compare financial statements from different time periods accurately. This is a serious limitation to financial statement analysis because it can lead to incorrect conclusions about a company's financial performance. While the other options are also limitations, they are less severe in comparison to inflation's impact.

Which of the Following Is the Most Serious Limitation to Financial