Which One of the Following Statements Is Correct Concerning Ratio

question 332

Multiple Choice

Which one of the following statements is correct concerning ratio analysis?

• A) A single ratio is often computed differently by different individuals.
• B) Ratios do NOT address the problem of size differences among firms.
• C) There is only a very limited number of ratios which can be used for analytical purposes.
• D) Each ratio has a specific formula that is used consistently by all analysts.
• E) Ratios can NOT be used for comparison purposes over periods of time.

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Definitions:

Cost Category

A classification of costs based on their nature or function within a business, often used for accounting and budgeting purposes.

Step-Down Method

The step-down method is a cost allocation approach used in accounting, which assigns overhead costs to various departments in steps, based on specified allocation bases.

Operating Departments

The divisions within a company where the primary functions related to the production of goods or provision of services are carried out.

Direct Method

An accounting approach used to allocate service department costs directly to producing departments without considering services rendered between service departments.