Limitations of Ratio Analysis Can Be Caused By

question 50

Multiple Choice

Limitations of ratio analysis can be caused by:

• A) purchasing expensive machinery at the end of the financial year.
• B) estimations of employee benefits.
• C) different depreciation methods adopted by entities in the same industry.
• D) all of the above.

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Definitions:

Issuer

An entity that develops, registers, and sells securities to finance its operations, such as corporations or governmental bodies issuing bonds or stocks.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act is a United States federal law that set new or expanded requirements for all U.S. public company boards, management, and public accounting firms, aiming to protect investors from fraudulent financial reporting.

Securities Regulations

Securities regulations are laws and rules designed to govern the trading, offering, and sale of securities to protect investors and ensure the fair functioning of securities markets.

SEC

Stands for the Securities and Exchange Commission, a U.S. federal agency responsible for regulating the securities industry and ensuring fair and efficient markets.