Although ratios can provide valuable information, they can also be misleading for which of the following reasons?
A) Ratios are only as reliable as the accounting data on which they are based.
B) Compilation of industry norms often does not report information about the distribution of values.
C) Comparative analysis depends on the availability of data for appropriately defined industries.
D) All of these are correct.

Question

Quizplus · Accepted Answer

All three options are correct reasons why ratios can be misleading. Ratios rely on accurate and reliable accounting data, which may not always be available. Industry norms may not report the full distribution of values, leading to skewed interpretations of ratios. Finally, the availability of appropriate industry data is crucial for comparative analysis, and incomplete or incorrect data can lead to inaccurate conclusions.

Although Ratios Can Provide Valuable Information, They Can Also Be