Which of the following is NOT a reason why financial analysts use ratio analysis?
A) Ratios help to pinpoint a firm's strengths.
B) Ratios restate accounting data in relative terms.
C) Ratios are ideal for smoothing out the differences that may exist when comparing firms that use different accounting practices.
D) Some of a firm's weaknesses can be identified through the usage of ratios.

Question

Quizplus · Accepted Answer

Ratio analysis is used by financial analysts to compare the performance and financial health of companies within the same industry by restating accounting data in relative terms. Ratios also help to identify a firm's strengths, weaknesses, and potential areas of risk. However, ratios cannot be used to smooth out the differences that may exist when comparing firms that use different accounting practices, as these differences may impact the accuracy and reliability of the ratios.

Which of the Following Is NOT a Reason Why Financial