Asked by Karan Patel on Apr 25, 2024

verifed

Verified

Financial ratio,percentage,and trend comparisons can be distorted by all of the following except

A) the presence of nonrecurring items among the firms being analyzed.
B) aggressive revenue recognition practices.
C) the timing of asset purchases.
D) accounting for similar economic fundamentals in similar fashion.

Financial Ratio

A numerical comparison derived from a company's financial statements, used to evaluate aspects of its operational efficiency, liquidity, profitability, and solvency.

Nonrecurring Items

Expenses or incomes that appear infrequently or irregularly on the financial statements, not expected to recur in the foreseeable future.

Revenue Recognition

An accounting process detailing how and when revenue is earned and reported, influencing financial statements.

  • Recognize the potential for financial ratios to be distorted by accounting choices and practices, and identify methods for adjusting analysis accordingly.
verifed

Verified Answer

PS
Parminder Singh8 days ago
Final Answer :
D
Explanation :
Accounting for similar economic fundamentals in similar fashion actually helps ensure that financial ratios, percentages, and trend comparisons are not distorted. Therefore, this option cannot be the correct answer. On the other hand, nonrecurring items, aggressive revenue recognition practices, and the timing of asset purchases can all distort financial analysis.