Economics · Financial Statement Analysis
Which of the following statements is TRUE regarding ratio analysis?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1An entity's management will not assess an entity's performance using financial ratios.
- 2The analysis of financial statements using ratios provides useful information when compared with previous performance or industry averages.✓
- 3Ratios based on historical data can perfectly predict the future performance of an entity.
- 4The interpretation of an entity's financial statements using ratios is only useful for potential investors.
Correct answer
The analysis of financial statements using ratios provides useful information when compared with previous performance or industry averages.
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