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Which of the following is not a disadvantage of using ratios for financial analysis is: A....

Which of the following is not a disadvantage of using ratios for financial analysis is:

A. Ratios are not reiiable when companies use different accounting methods.

B. Over time, a company's ratios change.

C. There are no set ranges for what constitutes a good or bad value.

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Answer #1

Answer - Option C (There are no set ranges for what constitutes a good or bad value)

Reason - There are no set ranges for what constitutes a good or bad value of using ratios for financial analysis because sometimes when you calculate some ratio say for example Debt/Equity Ratio & it comes say 0.40, it can be a good or bad value depending upon the size of the firm, a firm who is very big & has worth millions of Assets can consider this ratio to be good because that firm is capable of paying its debt easily given the size of the firm But on the other side if some other firm which is not that big in size the same Debt/Equity Ratio can be considered to be Bad if the firm does not have large amount of assets, Therefore There are no set ranges for what constitutes a good or bad value.

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