Which of These Statements Is NOT a Limitation of a Composite

question 4

Multiple Choice

Which of these statements is NOT a limitation of a composite index?

• A) A composite index may help inform complex decision making, such as taxation policy
• B) A composite index risks being misinterpreted by a layperson
• C) A composite index is only really suitable for giving an overall impression of change
• D) A composite index may become inaccurate if weightings change over time

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Definitions:

Operating Profit

The profit from a firm's core business operations, excluding deductions of interest and taxes.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenues, expenses, and net income.

Direct Expenses

Costs that can be directly attributed to a specific product, service, or project, such as raw materials and labor.

Net Loss

A net loss occurs when a company's total expenses exceed its total revenues during a specific accounting period, indicating a negative financial performance.