A significant problem in comparing profitability measures among companies is the:

Question

Quizplus · Accepted Answer

Differences in accounting methods can significantly impact measures of profitability, making it difficult to compare companies. For example, one company may use the LIFO inventory method, while another uses FIFO, which can result in different cost of goods sold figures and ultimately impact profitability measures such as gross margin and net income. This problem is less pronounced with consistent industry-wide accounting standards such as GAAP or IFRS but can still occur depending on the company's interpretation and implementation of these standards.

A Significant Problem in Comparing Profitability Measures Among Companies Is