Which of the following regarding ﬁnancial statement analysis is NOT correct?
A) According to the Du Pont identity, ROE is affected by operating eﬃciency, asset use eﬃciency, and ﬁnancial leverage.
B) It is straightforward to calculate the market value based measures of ﬁrm performance using ﬁnancial statements prepared according to GAAP.
C) Asset management ratios measure the intensity and eﬃciency of asset use.
D) For common size statements, we divide asset and liability accounts by total assets and statement of comprehensive income accounts by sales.
E) An increase in a ﬁrm's net ﬁxed assets is considered to be a use of cash.

Question

Quizplus · Accepted Answer

Market value based measures, such as stock price or market capitalization, cannot be directly calculated from financial statements prepared according to GAAP. These measures require information from the stock market such as stock price or number of shares outstanding.

Which of the Following Regarding ﬁNancial Statement Analysis Is NOT