Question

Financial ratios help financial statement users to evaluate the financial characteristics of companies by putting the large dollar amounts reported in financial statements into relative terms for comparison purposes. They also provide for a more meaningful analysis when the trends of financial ratios for a company are compared to the industry average trends over a period of time. Additionally, financial ratios are required reporting disclosures in the notes to the consolidated financial statements of U.S. companies that are regulated by the SEC. Which of the following statements about financial ratios is true?

1) All of the above statements are true.
2) A and B are true, but C is not true.
3) Financial ratios are not useful for evaluating the financial characteristics of companies.
4) Financial ratios are only required reporting disclosures for non-U.S. companies.

Answer 1

Financial ratios are useful for evaluating the financial characteristics of companies, provide meaningful analysis, and are required reporting disclosures for U.S. companies regulated by the SEC.

Step-by-step explanation:

The correct statement about financial ratios is that All of the above statements are true. Financial ratios help evaluate the financial characteristics of companies by comparing large dollar amounts reported in financial statements.

They also provide meaningful analysis when comparing trends of financial ratios for a company to industry average trends over time. Additionally, financial ratios are required to report disclosures in the notes to the consolidated financial statements of U.S. companies regulated by the SEC.