Question

Financial statement ratios can tell you lots about how a company is performing. However, which of the following is this analysis unlikely to accurately measure?

A) Sales department's ability to meet sales targets.
B) Employee satisfaction.
C) Ability of the company to remain a going concern (to make ongoing payments to creditors).
D) Cost of goods sold year-over-year trend analysis.

Answer 1

Financial statement ratios effectively measure various financial aspects of a company, but they do not accurately assess employee satisfaction, which is a qualitative measure.

Step-by-step explanation:

Financial statement ratios are tools used to assess various aspects of a company's performance, such as profitability, liquidity, and solvency.

However, they are unlikely to accurately measure employee satisfaction (Option B). Ratios such as the sales department's ability to meet sales targets, a company's ability to remain a going concern, and analyzing the cost of goods sold year-over-year trend can be effectively ascertained through financial ratios.

But employee satisfaction is a qualitative factor that requires different methodologies such as surveys, feedback, and other HR metrics.