Which of the Following Is a Limitation Related to the Usage

question 8

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.
• C)Financial ratios are designed for the use of creditors,not for managers.
• D)Different accounting practices between firms can distort comparisons.

---

Definitions:

Expected Annual Operating Activity

The projected level of operations, including production and sales, anticipated for a company over a year.

Common Activity Base

A measure used in activity-based costing for allocating overhead and indirect costs to products or services based on relevant activities.

Job Cost Sheet

A document that records the materials, labor, and manufacturing overhead costs assigned to an individual job or project.

Cost Accounting

A branch of accounting focused on capturing a company's total cost of production by assessing its variable and fixed costs.