Which of the Following Regarding fiNancial Statement Analysis Is NOT

question 214

Multiple Choice

Which of the following regarding financial statement analysis is NOT correct?

• A) According to the Du Pont identity, ROE is affected by operating efficiency, asset use efficiency, and financial leverage.
• B) It is straightforward to calculate the market value based measures of firm performance using financial statements prepared according to GAAP.
• C) Asset management ratios measure the intensity and efficiency of asset use.
• D) For common size statements, we divide asset and liability accounts by total assets and statement of comprehensive income accounts by sales.
• E) An increase in a firm's net fixed assets is considered to be a use of cash.

---

Definitions:

Job-Order Costing

A cost accounting system that accumulates costs according to specific jobs or orders, allowing for detailed cost tracking.

Manufacturing Cost

The total expense incurred in the production of goods, including direct materials, direct labor, and manufacturing overhead.

Machine-Hours

A measure of the amount of time machines are running in the production process, used as a basis for allocating overhead costs.

Manufacturing Overhead

All indirect costs related to the production process, such as maintenance, utilities, and quality control, not directly traceable to a product.