Which of the following statements is incorrect? Question 6 options: Many large firms operate different divisions in different industries, and this makes it hard to develop a meaningful set of industry benchmarks for these types of firms. Financial ratios should be interpreted with caution because it may be difficult to say with certainty what is a "good" value. For example, in the case of the current ratio, a "good" value is neither high nor low. Financial ratios should be interpreted with caution because higher value of profitability ratios imply greater efficiency in asset management. Ratio analysis facilitates comparisons by standardizing numbers. Financial ratios should be interpreted with caution because there exist seasonal and accounting differences that can reduce their comparability.

Ratio analysis is an important concept. It is used to assess the financial health of the companies.…

Answered: Which of the following statements is…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter6: Accounting Quality

Section: Chapter Questions

Problem 2QE

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Which of the following statements is incorrect?

Question 6 options:

	Many large firms operate different divisions in different industries, and this makes it hard to develop a meaningful set of industry benchmarks for these types of firms.
	Financial ratios should be interpreted with caution because it may be difficult to say with certainty what is a "good" value. For example, in the case of the current ratio, a "good" value is neither high nor low.
	Financial ratios should be interpreted with caution because higher value of profitability ratios imply greater efficiency in asset management.
	Ratio analysis facilitates comparisons by standardizing numbers.
	Financial ratios should be interpreted with caution because there exist seasonal and accounting differences that can reduce their comparability.

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