Which of the following is true of ratio analysis?

Question

Quizplus · Accepted Answer

A) A ratio is computed by dividing one balance sheet or income statement by another is a true statement that describes the process of ratio analysis.

B) The choice of the scale determines the story that can be garnered from the ratio is also a true statement, as the same ratio can provide different insights depending on the scale used.

C) Ratios can be calculated based on the type of firm being analyzed or the kind of analysis being performed. This statement is also true, as there are different types of ratios that can be used to analyze different aspects of a company's financial performance.

Therefore, all of the above statements are true, making option D the correct answer.

Which of the Following Is True of Ratio Analysis