One Problem with Ratio Analysis Is That Relationships Can Be

question 53

True/False

One problem with ratio analysis is that relationships can be manipulated.For example, if our current ratio is greater than 1.5, then borrowing on a short-term basis and using the funds to build up our cash account would cause the current ratio to increase.

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Definitions:

Market-Based Income

Income generated from investments in the financial markets, such as stocks, bonds, or other assets.

Cash Flow From Investments

Financial statement item that reports the net amount of money used for or generated from the company's investment purchases and sales during a specific period.

Acquisition

The process of acquiring control of another company by purchase or exchange of equity.

Capital Gain

The increase in value of an asset or investment from its purchase price to its selling price.