The use of differing accounting treatments-especially relative to inventory and depreciation-can distort the results of ratio analysis, regardless of whether cross-sectional or time-series analysis is used.

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Differing accounting treatments can lead to different valuation of inventory and different depreciation methods, which in turn can affect the results of ratio analysis and make it difficult to compare across different companies or time periods. Therefore, it is important to consider the accounting policies and methods used in preparing financial statements when conducting ratio analysis.

The Use of Differing Accounting Treatments-Especially Relative to Inventory and Depreciation-Can