Practicing Success
Which of the following is correct in respect of accounting ratios? |
Ratios are essentially derived numbers and their efficacy depends a great deal upon the basic numbers from which they are calculated If the financial statements contain some errors, the derived numbers in terms of ratio analysis would also present an erroneous scenario. A ratio must be calculated using numbers which are meaningfully correlated. A ratio calculated by using two unrelated numbers would hardly serve any purpose All of the above |
All of the above |
Accounting ratios exhibit relationship, if any, between accounting numbers extracted from financial statements. Ratios are essentially derived numbers and their efficacy depends a great deal upon the basic numbers from which they are calculated. Hence, if the financial statements contain some errors, the derived numbers in terms of ratio analysis would also present an erroneous scenario. Further, a ratio must be calculated using numbers which are meaningfully correlated. A ratio calculated by using two unrelated numbers would hardly serve any purpose. Thus, all the options are true. |