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One Problem with Ratio Analysis Is That Relationships Can Be

question 53

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One 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.


Definitions:

Extranet

A controlled private network that allows access to partners, vendors, or selected external parties, extending a company’s intranet.

Multiple Organizations

Refers to situations involving more than one organization, often pertaining to partnerships, coalitions, or competitive environments.

Corporate Portal

A website that provides a single point of access to critical business information located both inside and outside an organization.

Critical Business Information

Vital data that is essential for the operation and competitiveness of a company.

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