A company's financial statements are interpreted by using:
A) ratio analysis.
B) business valuation.
C) the present value method.
D) the discount rate.

Question

Quizplus · Accepted Answer

Ratio analysis is a method of interpreting a company's financial statements by comparing different financial ratios. This allows investors and analysts to gain insights into a company's financial health, performance, and potential risks. It is a commonly used approach for evaluating a company's profitability, liquidity, solvency, and efficiency ratios. Business valuation, the present value method, and the discount rate are all related to assessing the value of a company, but they are not specific methods for interpreting financial statements.

A Company's Financial Statements Are Interpreted by Using