The 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 used.
D) the same accounting procedures were used.
E) all of the above.

Question

Quizplus · Accepted Answer

All of the above choices are important considerations when conducting ratio analysis. A single ratio cannot provide a comprehensive assessment of a company's financial performance, so it is important to analyze multiple ratios. The dates of the financial statements being compared should be the same to ensure consistency. Audited statements are preferable as they have been reviewed by an independent party. The same accounting procedures should be used to maintain consistency in the calculations. Therefore, all of the choices are important for proper ratio analysis.

The Analyst Should Be Careful When Conducting Ratio Analysis to Ensure