Question

Which of the following is not a concern in using ratio analysis?a. We don't know an 'optimal' value for ratios..b. We cannot find adequate industry averages.c. There may be accounting differences.d. Ratios do not give us answers to how to 'fix' an organization.e. All of the above are concerns.

Answer 1

b. We cannot find adequate industry averages

Step-by-step explanation:

• Ratio analysis is a process for determining also to interpret the relationship between the items of financial statements. It aims to provide a meaningful understanding of the position of the organization.

• There are five basic types of ratios as the profitability, the liquidity, the activity, debt, and market thus its use for an intra and inter-firm comparison, useful in locating weaker areas, helpful in addressing the operating efficiency and simplifies accounting data.