Which of the following statements identify problems with financial statement analysis?
I: It is not always easy to identify a suitable benchmark for comparison purposes.
II: As many firms are conglomerates owning more than one line of business it is sometimes difficult to identify groups of firms that are directly comparable.
III: Firms in the same industry operate globally and comparison may be difficult due to different accounting standards used in the preparation of financial statements.
IV: Unusual events may affect financial performance which may give misleading signals when comparing firms' results.
A)I only
B)I,II,III and IV
C)I,II and IV
D)I and III
E)III and IV

Question

Quizplus · Accepted Answer

Statements I, II, and IV identify problems with financial statement analysis. Statement III is partially true as different accounting standards used in the preparation of financial statements can make comparison difficult, but industry-specific standards such as IFRS for many industries can reduce this difficulty.

Which of the Following Statements Identify Problems with Financial Statement