Ratios Taken Out of Context Are Not Always Helpful and Can

question 12

True/False

Ratios taken out of context are not always helpful and can be misleading.

---

Definitions:

Indirect Method

A method used in cash flow statements to adjust net income for changes in non-cash accounts to calculate cash provided by operating activities.

Direct Method

A cash flow statement preparation approach that shows the specific sources of operating cash receipts and payments.

Accounts Payable

Liabilities owed by a business to creditors for goods and services purchased on credit which are payable within a year.

Merchandise Suppliers

Companies or individuals that provide products for sale to retailers, often involving wholesale transactions.