One Problem with Comparing Financial Ratios Prepared by Different Reporting

question 65

Multiple Choice

One problem with comparing financial ratios prepared by different reporting agencies is

• A)some agencies receive financial information later than others.
• B)agencies vary in their policies as to what is included in specific calculations.
• C)some agencies are careless in their reporting.
• D)some firms are more conservative in their accounting practices.
• E)none of the above.

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Definitions:

GAAP

Generally Accepted Accounting Principles, which are a collection of commonly followed accounting rules and standards for financial reporting.

Quarterly Income

The net income earned by a company during a three-month period, typically reported in quarterly financial statements.

Operating Segments

Components of an enterprise that engage in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker.

Financial Reporting

The process of disclosing financial results and related information to stakeholders and the public, typically through formal documents.