Benefits of Using Ratio Analysis Include All of the Following

question 50

Multiple Choice

Benefits of using ratio analysis include all of the following except:

• A) Ratios are usually easy to compute.
• B) It is always clear what the optimal ratio is for a company.
• C) Ratios allow analysts to look at one figure in the financial statements in relation to a second one.
• D) Ratios can be used to compare companies that report results in different currencies.

---

Definitions:

Discounting Principle

A psychological concept suggesting that when there are multiple perceived causes for behaviour, the importance of any single cause is diminished.

False Consensus Effect

The cognitive bias where a person overestimates the extent to which their beliefs, values, or behaviors are normal and shared by others.

Theory of Mind

The ability to attribute mental states—beliefs, intents, desires, emotions—to oneself and others and to understand that others have beliefs and perspectives different from one's own.

Fundamental Attribution Error

The inclination to place excessive focus on personal characteristics while undervaluing the impact of environmental conditions in interpreting the actions of others.