Which of the Following Is a Limitation of Ratio Analysis

question 111

Multiple Choice

Which of the following is a limitation of ratio analysis?

• A) Financial ratios cannot reveal certain specific aspects of a firm's financial position.
• B) Ratios that reveal large deviations from the norm merely indicate the possibility of a problem.
• C) It is difficult to access audited financial statements for ratio analysis.
• D) Ratio analysis assumes that inflation has no effect on a firm's business.

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Definitions:

Individual Incentive Systems

Compensation schemes that reward employees based on their personal productivity, effort, or achievement, aiming to boost individual performance.

Performance

The act of carrying out or accomplishing tasks, duties, or goals as expected or required in a specific role or function.

Subjectively

Based on or influenced by personal feelings, tastes, or opinions rather than external facts or evidence.

Piece-rate System

A compensation method in which employees are paid based on the quantity of work they complete, rather than the hours worked.