Which of the following is/are true?
A)Interpreting the income statement involves studying the relations among revenues, expenses, and net income both over time and across firms.
B)Comparisons are likely more valid for the same firm over time than across firms because of the difficulty in identifying truly similar firms.
C)In evaluating over-time performance of a given firm, the user must understand both current economic conditions and how those conditions may have changed over the period of analysis.
D)In evaluating across-firm performance, the user should control for the underlying business model by selecting peer firms that are similar, economically, to the firm being analyzed.
E)All of the above are true.

Question

Quizplus · Accepted Answer

All of the statements are true. Interpreting the income statement involves analyzing the relationship between revenues, expenses, and net income over time and across firms. While comparisons across firms can be challenging due to the difficulty in identifying truly similar firms, comparisons over time for the same firm can be more valid. Understanding current economic conditions and how they may have changed over the analysis period is crucial when evaluating a firm's over-time performance. Additionally, when evaluating across-firm performance, controlling for the underlying business model by selecting similar peer firms is recommended.

Which of the Following Is/are True