Which of the Following Regarding Financial Statement Analysis Is NOT

question 252

Multiple Choice

Which of the following regarding financial statement analysis is NOT correct?

• A) According to the Du Pont identity, ROE is affected by operating efficiency, asset use efficiency, and financial leverage.
• B) It is straightforward to calculate the market value based measures of firm performance using financial statements prepared according to GAAP.
• C) Asset management ratios measure the intensity and efficiency of asset use.
• D) For common size statements, we divide asset and liability accounts by total assets and statement of comprehensive income accounts by sales.
• E) An increase in a firm's net fixed assets is considered to be a use of cash.

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Definitions:

Test Statistic

A value calculated from sample data during hypothesis testing. It is used to decide whether to reject the null hypothesis.

Population Mean

The average value of a set of characteristics for an entire population.

Alpha

A threshold value in hypothesis testing that determines the level of significance, usually set to 0.05 or 0.01.

Type I Error

An error in hypothesis testing that occurs when the null hypothesis is wrongly rejected, falsely indicating a significant result.