Which of the Following Statements Regarding the Analysis of Absolute

question 85

Multiple Choice

Which of the following statements regarding the analysis of absolute amounts of various accounts reported on the financial statements is not true?

• A)Financial statement users with expertise in particular industries can look at absolute amounts and assess a company's performance in a certain area.
• B)To correctly evaluate an absolute amount,the analyst must consider its relative importance.
• C)Economic statistics such as the gross national product are built upon totals of absolute amounts reported by businesses.
• D)Using absolute amounts eliminates the problem of varying materiality levels.

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Definitions:

Inflation

The velocity at which the general cost of goods and services surges, thereby diminishing the purchasing capacity.

Output

The amount of something produced by a person, machine, or industry.

Unemployment

Unemployment refers to the situation in which individuals who are capable of working and willing to work at prevailing wage rates cannot find employment.

Sacrifice Ratio

An economic term that quantifies the effect of decreasing inflation on an economy, typically measured as the percentage loss in output per one percentage point decrease in inflation.