Determining whether a firm's financial position is improving or deteriorating requires analyzing more than the ratios for a given year.Trend analysis is one method of measuring changes in a firm's performance over time.

Question

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Trend analysis involves measuring changes in a firm's performance over time, which is necessary to determine whether its financial position is improving or deteriorating. Therefore, the statement is true.

Determining Whether a Firm's Financial Position Is Improving or Deteriorating