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Basic Question 0 of 11
Which of the following statements DOES NOT represent a limitation of financial ratios?
B. They are hard for users to understand.
C. Many firms have divisions that are unlike one another with different accounting ratios.
D. Inconsistency among ratios, which may not agree with each other.
A. There are accounting differences across firms.
B. They are hard for users to understand.
C. Many firms have divisions that are unlike one another with different accounting ratios.
D. Inconsistency among ratios, which may not agree with each other.
User Contributed Comments 10
| User | Comment |
|---|---|
| julescruis | If you got this right, you may get a beer and watch tv, I will |
| hannovanwyk | sounds good, feel better with this work than all the other accounting! |
| copus | maybe I have a big mental block on accounting, but these darn ratios are not that easy for me to understand....I´m off to have a couple of beers to find some accounting inspiration! |
| JakeZ | riiiiiiiiiiiiiiiiiight I am an Accounting/Finance grad and some of these ratios are hard to understand. |
| DonAnd | shame on you JakeZ!!! |
| jayj001 | brilliant explanation lol |
| thegeneral101 | i was a finance and accounting major and these ratios can still be tricky. love this question lol |
| jonan203 | "accounting ratios are not hard to understand" whoever wrote this question did it for the lulz... |
| Logaritmus | But for me it was clear that A,C and D are fairly obvious limitations of financial ratios. By elimination i will point @ B. |
| mn158 | I laughed so hard at the explanation ! |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
explain the rationale for using price multiples to value equity, how the price to earnings multiple relates to fundamentals, and the use of multiples based on comparables
calculate and interpret the following multiples: price to earnings, price to an estimate of operating cash flow, price to sales, and price to book value
CFA® 2025 Level I Curriculum, Volume 3, Module 8.