Discuss five limitations to ratio analysis
What will be an ideal response?
There are six limitations discussed in the text:
1. Industry identification is difficult.
2. Industry averages are only approximations.
3. Accounting practices differ widely among firms.
4. Financial ratios can be too high or too low (e.g. current ratio).
5. The industry average may not be ideal.
6. Seasonality in firm operations causes ratios to vary with seasons.
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At the end of 2016, Mirror Productions determined that one of its copyrights was worthless. The copyright had a cost of $320,000 . The copyright had been amortized for 8 years of its estimated 25-year legal life. Which of the following statements is the justification for removing the remaining cost of the copyright from the accounting records?
a. The copyright no longer represents a future benefit to the company. b. The federal government does not allow copyrights to be recorded as assets once they are deemed worthless. c. The cost of the copyright represents an obligation to return capital contributions to the stockholders. d. The cost of the copyright has usefulness that will impact the net income of future accounting periods.
In vendor-managed inventory, buyers share sales information directly with key suppliers
Indicate whether the statement is true or false
Like financial metrics, sustainability metrics are standardized
Indicate whether the statement is true or false
The ______ is the relationship between two or more tasks that requires certain tasks to be done before others.
a. least priority relationship b. precedence relationship c. factor rating d. contingency relationship