Which of These Are Limitations of Financial Analysis

question 27

Multiple Choice

Which of these are limitations of financial analysis?
I. The past is an imperfect guide to the future
II. Historical cost financial reports are not adjusted for inflation
III. Non-quantitative factors are not considered
IV. Ratio results often contain errors in calculations
V Comparisons may not be valid

• A) I, II, III, V
• B) I, II, IV, V
• C) II, III, IV, V
• D) I, III, IV, V

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Definitions:

Random Variable

A numerical description of the outcome of an experiment.

Mean

A measure of central location computed by summing the data values and dividing by the number of observations.

Multiple Regression Model

The mathematical equation that describes how the dependent variable y is related to the independent variables x1, x2, . . . , xp and an error term e.

Independent Variable

The variable that is doing the predicting or explaining. It is denoted by x.