The most acceptable method of evaluating the financial statements is to compare the company's current financial:
A) ratios to the company's historical ratios.
B) statements to the financial statements of similar companies operating in other countries.
C) ratios to the average ratios of all companies located within the same geographic area.
D) statements to those of larger companies in unrelated industries.
E) statements to the projections that were created based on Tobin's Q.

Question

Quizplus · Accepted Answer

Comparing a company's current financial ratios to its historical ratios allows for an assessment of the company's financial performance over time, indicating growth, stagnation, or decline. This helps in identifying trends and making informed decisions for the company's future. Comparing to financial statements of similar companies operating in other countries or unrelated larger companies may not provide relevant insights. Average ratios of all companies located within the same geographic location may serve as a general benchmark for the industry but may not consider the specific characteristics of the company being evaluated. Projections based on Tobin's Q are not considered an established method for evaluating financial statements.

The Most Acceptable Method of Evaluating the Financial Statements Is