Problem with Ratio Analysis Is That Relationships Can Be Manipulated

question 22

True/False

problem with ratio analysis is that relationships can be manipulated For example, if our current ratio is greater than 1.5, then borrowing on a short-term basis and using the funds to build up our cash account would cause the current ratio to increase.

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Definitions:

Incentive Function

The role of incentives in influencing the behavior and decisions of individuals or organizations.

Competitive Markets

Markets characterized by a large number of buyers and sellers, where no single entity controls the market prices.

Resource

Any physical or virtual entity of limited availability that needs to be consumed to obtain a benefit, including natural resources, human resources, and financial resources.