When data used in ratio analysis are based on historical book values, the resulting ratios reflect price-level effects and real economic values.

Name: When data used in ratio analysis are based on historical book values, the resulting ratios reflect price-level effects and real economic values.
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Question

Quizplus · Accepted Answer

Ratios based on historical book values do not adjust for inflation or changes in price levels, hence they may not accurately reflect current economic values.

When Data Used in Ratio Analysis Are Based on Historical