Which of the Following Is a Limitation Related to the Usage

question 78

Multiple Choice

Which of the following is a limitation related to the usage of ratios when reviewing a firm's performance?

• A) Ratios reveal differences in policy and performance between years.
• B) Ratios can be used to compare firms that are in the same industry if one firm's sales are higher than another firm's.
• C) Financial ratios are designed for the use of creditors, not for managers.
• D) Different accounting practices between firms can distort comparisons.

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Definitions:

Interest Rate

An interest rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Money Supply

The complete volume of cash and similar liquid resources present in an economy at any specific moment, covering bank deposits, cash, and easily liquidated assets.

Money Supply

Refers to the total quantity of money available in an economy at a specific time, including currency, coins, and balances held in checking and savings accounts.

Interest Rates

The expense incurred when taking out a loan, usually represented as a yearly percentage rate of the principal amount.