With ratio analysis,when an income or statement of cash flows item is compared to a balance sheet item:
A)the year-end balance of the balance sheet item should be used
B)the average of the beginning and ending year values should be taken for the balance sheet item rather than just using the year-end value.
C)the beginning balance of the balance sheet item should be used
D)none of the options is correct

Question

Quizplus · Accepted Answer

When comparing an income or statement of cash flows item to a balance sheet item, it's better to take the average of the beginning and ending year values for the balance sheet item to provide a more accurate representation of its value throughout the year. Using just the year-end balance of the balance sheet item may not be reflective of its value during the entire year.

With Ratio Analysis,when an Income or Statement of Cash Flows