The use of the unaudited financial statements for ratio analysis is preferable because it reflects the firm's true financial condition.

Question

Quizplus · Accepted Answer

Unaudited financial statements may contain errors, omissions, or misstatements. Audited financial statements are reviewed and verified by independent, objective auditors, ensuring the accuracy and reliability of the financial information. Therefore, audited financial statements are preferred for ratio analysis as they provide a more reliable and accurate reflection of the firm's financial condition.

The Use of the Unaudited Financial Statements for Ratio Analysis