Many ratios require an average be used for the balance sheet numbers because the
A) income statement refers to a point in time.
B) accountants may have made errors in the financial statements.
C) balance sheet numbers are a point in time and are being compared to an income statement number that covers a period of time.
D) income statement numbers represent a point in time and are being compared to a balance sheet number that covers a period of time.

Question

Quizplus · Accepted Answer

Balance sheet numbers are a snapshot at a specific point in time, while income statement numbers cover a period of time. Using averages for balance sheet numbers helps align them with the period-based income statement numbers for accurate ratio analysis.

Many Ratios Require an Average Be Used for the Balance