The Basic Limitations Associated with Ratio Analysis Include

question 67

Multiple Choice

The basic limitations associated with ratio analysis include

• A)the lack of comparability among firms in a given industry.
• B)the use of estimated items in accounting.
• C)the use of historical costs in accounting.
• D)all of these.

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Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often paying fixed dividends.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a dataset, often used in accounting to value inventory.

Common Shares

Units of ownership interest or equity in a corporation that entitle their holder to a share of the corporation's earnings and give them the right to vote.