Which of the following may reduce the effectiveness of ratio analysis? a. Highly diversified companies may have activities that obscure trends that may appear more clearly in single function companies. b. Management may use window dressing at the end of the year to improve apparent performance. c. Companies in the same industry may use different accounting practices which may indicate differing levels of performance that don't really exist. d. Book values may not be comparable from company to company because of the age of the asset, inflation, etc. e. All of these can reduce the effectiveness of ratio analysis.

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Answered: Which of the following may reduce the…

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 44MCQ: When a Dupont analysis reveals that a company has much higher than average asset turnover and much...

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Which of the following may reduce the effectiveness of ratio analysis?

		a. Highly diversified companies may have activities that obscure trends that may appear more clearly in single function companies.
		b. Management may use window dressing at the end of the year to improve apparent performance.
		c. Companies in the same industry may use different accounting practices which may indicate differing levels of performance that don't really exist.
		d. Book values may not be comparable from company to company because of the age of the asset, inflation, etc.
		e. All of these can reduce the effectiveness of ratio analysis.