An analyst should be careful when conducting ratio analysis to ensure that
A)the overall performance of the firm is not judged on a single ratio.
B)the dates of the financial statements being compared are the same.
C)audited statements are being used.
D)the same accounting procedures were used.
E)all of the above

Question

Quizplus · Accepted Answer

All of the given options are important considerations when conducting ratio analysis. A single ratio cannot determine the overall performance of the firm, so multiple ratios should be evaluated. The dates of the financial statements need to be the same for meaningful comparison. Audited statements are more reliable than unaudited statements. And, the use of consistent accounting procedures is necessary for accurate analysis.

An Analyst Should Be Careful When Conducting Ratio Analysis to Ensure