It is easier to evaluate a ﬁrm using its ﬁnancial statements when the ﬁrm:
A) Is a conglomerate.
B) Is global in nature.
C) Uses the same accounting procedures as other ﬁrms in its industry.
D) Has a different ﬁscal year than other ﬁrms in its industry.
E) Tends to have one-time events such as asset sales and property acquisitions.

Question

Quizplus · Accepted Answer

When a firm uses the same accounting procedures as other firms in its industry, it becomes easier to compare its financial statements with its competitors. This helps in evaluating the performance of the firm by analyzing its financial statements. A conglomerate or a global firm may have diverse businesses and this can make it challenging to evaluate the firm's financial performance. Having a different fiscal year or one-time events such as asset sales and property acquisitions can also make it difficult to evaluate a firm's financial statements. Therefore, option C is the best choice.

It Is Easier to Evaluate a ﬁRm Using Its ﬁNancial