A Limitation of Ratio Analysis Is That

question 11

Multiple Choice

A limitation of ratio analysis is that:

• A) it is useful only for large, multidivisional firms.
• B) inflation, which distorts the firm's balance sheet, is considered when calculating ratios.
• C) seasonal factors that distort the firm's balance sheet are taken into account when calculating ratios.
• D) window-dressing techniques will change the ratios of a firm.
• E) statistical procedures are considered to analyze the net effects of a set of ratios.

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Definitions:

Short-Range

Pertaining to activities, planning, or forecasting that covers a relatively brief period of time, typically up to one year.

Medium-Range

Pertaining to the intermediate term, often in the context of planning, forecasting, or operations.

Long-Range

Pertaining to strategic decisions or actions that consider and impact a significant period into the future, often beyond the immediate or short term.

Point-Of-Sale Computers

Computerized systems used in retail environments to conduct sales transactions, manage inventory, and record customer purchases.