Using Average (As Opposed to End-Of-Period) Values in Ratio Analysis

question 133

Multiple Choice

Using average (as opposed to end-of-period) values in ratio analysis is most appropriate when:

• A) both values in the ratio come from the income statement.
• B) both values in the ratio come from the balance sheet.
• C) one value comes from the balance sheet and one value comes from the income statement.
• D) Both a. and b. are correct.
• E) All of the above are correct.

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Definitions:

Prefiling Period

Prefiling period is the timeframe before the official submission or filing of a legal document or case in a court or regulatory body.

Register Securities

The process of recording and maintaining financial securities with a regulatory body, often required for securities to be legally sold to the public.

Average Investor

An individual or entity that makes investment decisions based on typical financial goals and risk tolerance, often represented as a general public member.

Investment Contracts

Financial contracts that typically denote a type of investment security, entitling the investor to specific returns.