Which One of the Following Statements Is Correct Concerning Ratio

question 75

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) Only a very limited number of ratios 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:

Plantwide Overhead Rate

A single overhead absorption rate calculated for an entire manufacturing plant and applied to all units produced, simplifying the allocation of indirect costs.

Overhead Cost

Expenses related to the operation of a business that cannot be directly linked to a specific product or service.

Simplicity

The quality of being easy to understand or use; the absence of complexity or complication.

Departmental Overhead Costs

Expenses related to the indirect support of producing goods or services in specific departments, rephrased as the allocation of indirect costs to departmental operations.