The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.

Question

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Comparing only absolute amounts has drawbacks,however,because materiality levels differ from company to company or even from year to year for a given company.The materiality of information refers to its relative importance.An item is considered material if knowledge of it would influence the decision of a reasonably informed user.

The Drawback of Studying Absolute Amounts Reported in Financial Statements