Select the Incorrect Statement Regarding Ratio Analysis

question 38

Multiple Choice

Select the incorrect statement regarding ratio analysis.

• A) Ratio analysis is a specific form of horizontal analysis.
• B) There are many different ratios available for evaluating a firm's performance.
• C) Some ratios involve an account from the balance sheet and one from the income statement.
• D) Ratio analysis involves making comparisons between different accounts in the same set of financial statements.

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Definitions:

Variable Costs

Expenses that change in proportion to the level of activity or production volume.

Static Budget

A budget that does not change or adapt over time, based on the assumption of a fixed level of activity.

Activity Index

The activity that causes changes in the behavior of costs.

Variable Costs

Costs that vary directly with the level of production or service output, such as materials and labor.