Which of the following is true of ratio analysis?
A) A ratio is computed by dividing one balance sheet item or income statement item by another.
B) The choice of the scale determines the story that can be garnered from the ratio.
C) Ratios can be calculated based on the type of firm being analyzed or the kind of analysis being performed.
D) All of the above are true.

Question

Quizplus · Accepted Answer

All of the statements are true about ratio analysis. Ratios are computed by dividing one balance sheet item or income statement item by another, the choice of the scale determines the story that can be garnered from the ratio, and ratios can be calculated based on the type of firm being analyzed or the kind of analysis being performed.

Which of the Following Is True of Ratio Analysis