Ratios Are Used as Tools in Financial Analysis

question 191

Multiple Choice

Ratios are used as tools in financial analysis

• A) instead of horizontal and vertical analyses.
• B) because they may provide information that is not apparent from inspection of the individual components of the ratio.
• C) because even single ratios by themselves are quite meaningful.
• D) because they are prescribed by GAAP.

---

Definitions:

Net 30 Credit Policy

A credit term that allows a customer 30 days to pay the invoice in full from the invoice date.

Monthly Interest Rate

The percentage of interest that is charged or earned on an amount of money over a month.

Variable Cost

Expenses that change in proportion to the amount of goods or services produced.

Net Present Value

An investment's difference between the present value of cash inflows and the present value of cash outflows over time.