Which One of the Following Statements Is Correct Concerning Ratio

question 386

Multiple Choice

Which one of the following statements is correct concerning ratio analysis?

• A) A single ratio is often computed differently by different individuals.
• B) Ratios do NOT address the problem of size differences among firms.
• C) There is only a very limited number of ratios which can be used for analytical purposes.
• D) Each ratio has a specific formula that is used consistently by all analysts.
• E) Ratios can NOT be used for comparison purposes over periods of time.

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Definitions:

Accounts Payable Turnover Ratio

A liquidity metric that measures how quickly a company pays off its suppliers.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials and labor.

Accounts Payable

Short-term financial obligations to suppliers or creditors that a company owes for goods and services received but not yet paid for.

Accrual of Interest

The process of recognizing interest earned or incurred on outstanding loans or debt securities over a specific period, regardless of whether the cash has been received or paid.