Suppose you want to evaluate the financial performance of a company over the las

Question

Suppose you want to evaluate the financial performance of a company over the last 5 years. What factors might affect the comparability of a firm's financial ratios over such a long period of time? A. Business practices remain unchanged over time, however, expected financial relationships might change. Changes in accounting method as well as a major change in management can have a negative affect on the financial performance of a company. B. Business practices often change and, therefore, expected financial relationships might change. Booms and recessions occur. But these are not the only appropriate explanations for all observed changes. Changes in accounting method, significant acquisitions and divestitures, and irregular items also impact comparability. C. Business practices remain unchanged over time, thus, financial relationships remain the same as well. Changes in accounting method as well as a major change in management can have a very favorable affect on the financial performance of a company. D. Business practices often change and, therefore, expected financial relationships might change. In addition, a change in leadership and changes in ownership (shareholders) can affect the financial ratios over a long, 5 year period. In essence, the financial ratios are unreliable to an investor. Suppose you want to evaluate the financial performance of a company over the last 5 years. What factors might affect the comparability of a firm's financial ratios over such a long period of time? A. Business practices remain unchanged over time, however, expected financial relationships might change. Changes in accounting method as well as a major change in management can have a negative affect on the financial performance of a company. B. Business practices often change and, therefore, expected financial relationships might change. Booms and recessions occur. But these are not the only appropriate explanations for all observed changes. Changes in accounting method, significant acquisitions and divestitures, and irregular items also impact comparability. C. Business practices remain unchanged over time, thus, financial relationships remain the same as well. Changes in accounting method as well as a major change in management can have a very favorable affect on the financial performance of a company. D. Business practices often change and, therefore, expected financial relationships might change. In addition, a change in leadership and changes in ownership (shareholders) can affect the financial ratios over a long, 5 year period. In essence, the financial ratios are unreliable to an investor. Suppose you want to evaluate the financial performance of a company over the last 5 years. What factors might affect the comparability of a firm's financial ratios over such a long period of time? Suppose you want to evaluate the financial performance of a company over the last 5 years. What factors might affect the comparability of a firm's financial ratios over such a long period of time? Suppose you want to evaluate the financial performance of a company over the last 5 years. What factors might affect the comparability of a firm's financial ratios over such a long period of time? A. Business practices remain unchanged over time, however, expected financial relationships might change. Changes in accounting method as well as a major change in management can have a negative affect on the financial performance of a company. B. Business practices often change and, therefore, expected financial relationships might change. Booms and recessions occur. But these are not the only appropriate explanations for all observed changes. Changes in accounting method, significant acquisitions and divestitures, and irregular items also impact comparability. C. Business practices remain unchanged over time, thus, financial relationships remain the same as well. Changes in accounting method as well as a major change in management can have a very favorable affect on the financial performance of a company. D. Business practices often change and, therefore, expected financial relationships might change. In addition, a change in leadership and changes in ownership (shareholders) can affect the financial ratios over a long, 5 year period. In essence, the financial ratios are unreliable to an investor. A. Business practices remain unchanged over time, however, expected financial relationships might change. Changes in accounting method as well as a major change in management can have a negative affect on the financial performance of a company. B. Business practices often change and, therefore, expected financial relationships might change. Booms and recessions occur. But these are not the only appropriate explanations for all observed changes. Changes in accounting method, significant acquisitions and divestitures, and irregular items also impact comparability. C. Business practices remain unchanged over time, thus, financial relationships remain the same as well. Changes in accounting method as well as a major change in management can have a very favorable affect on the financial performance of a company. D. Business practices often change and, therefore, expected financial relationships might change. In addition, a change in leadership and changes in ownership (shareholders) can affect the financial ratios over a long, 5 year period. In essence, the financial ratios are unreliable to an investor. A. Business practices remain unchanged over time, however, expected financial relationships might change. Changes in accounting method as well as a major change in management can have a negative affect on the financial performance of a company. B. Business practices often change and, therefore, expected financial relationships might change. Booms and recessions occur. But these are not the only appropriate explanations for all observed changes. Changes in accounting method, significant acquisitions and divestitures, and irregular items also impact comparability. C. Business practices remain unchanged over time, thus, financial relationships remain the same as well. Changes in accounting method as well as a major change in management can have a very favorable affect on the financial performance of a company. D. Business practices often change and, therefore, expected financial relationships might change. In addition, a change in leadership and changes in ownership (shareholders) can affect the financial ratios over a long, 5 year period. In essence, the financial ratios are unreliable to an investor. A. Business practices remain unchanged over time, however, expected financial relationships might change. Changes in accounting method as well as a major change in management can have a negative affect on the financial performance of a company. B. Business practices often change and, therefore, expected financial relationships might change. Booms and recessions occur. But these are not the only appropriate explanations for all observed changes. Changes in accounting method, significant acquisitions and divestitures, and irregular items also impact comparability. C. Business practices remain unchanged over time, thus, financial relationships remain the same as well. Changes in accounting method as well as a major change in management can have a very favorable affect on the financial performance of a company. D. Business practices often change and, therefore, expected financial relationships might change. In addition, a change in leadership and changes in ownership (shareholders) can affect the financial ratios over a long, 5 year period. In essence, the financial ratios are unreliable to an investor. A. Business practices remain unchanged over time, however, expected financial relationships might change. Changes in accounting method as well as a major change in management can have a negative affect on the financial performance of a company. A. Business practices remain unchanged over time, however, expected financial relationships might change. Changes in accounting method as well as a major change in management can have a negative affect on the financial performance of a company. Business practices remain unchanged over time, however, expected financial relationships might change. Changes in accounting method as well as a major change in management can have a negative affect on the financial performance of a company. B. Business practices often change and, therefore, expected financial relationships might change. Booms and recessions occur. But these are not the only appropriate explanations for all observed changes. Changes in accounting method, significant acquisitions and divestitures, and irregular items also impact comparability. B. Business practices often change and, therefore, expected financial relationships might change. Booms and recessions occur. But these are not the only appropriate explanations for all observed changes. Changes in accounting method, significant acquisitions and divestitures, and irregular items also impact comparability. Business practices often change and, therefore, expected financial relationships might change. Booms and recessions occur. But these are not the only appropriate explanations for all observed changes. Changes in accounting method, significant acquisitions and divestitures, and irregular items also impact comparability. C. Business practices remain unchanged over time, thus, financial relationships remain the same as well. Changes in accounting method as well as a major change in management can have a very favorable affect on the financial performance of a company. C. Business practices remain unchanged over time, thus, financial relationships remain the same as well. Changes in accounting method as well as a major change in management can have a very favorable affect on the financial performance of a company. Business practices remain unchanged over time, thus, financial relationships remain the same as well. Changes in accounting method as well as a major change in management can have a very favorable affect on the financial performance of a company. D. Business practices often change and, therefore, expected financial relationships might change. In addition, a change in leadership and changes in ownership (shareholders) can affect the financial ratios over a long, 5 year period. In essence, the financial ratios are unreliable to an investor. D. Business practices often change and, therefore, expected financial relationships might change. In addition, a change in leadership and changes in ownership (shareholders) can affect the financial ratios over a long, 5 year period. In essence, the financial ratios are unreliable to an investor. Business practices often change and, therefore, expected financial relationships might change. In addition, a change in leadership and changes in ownership (shareholders) can affect the financial ratios over a long, 5 year period. In essence, the financial ratios are unreliable to an investor.

Explanation / Answer

Ans: Option B:Business practices often change and, therefore, expected financial relationships might change. Booms and recessions occur. But these are not the only appropriate explanations for all observed changes. Changes in accounting method, significant acquisitions and divestitures, and irregular items also impact comparability.

Reason: Change in ratio is the sum total of all the external and internal factors affecting the business so not a single factor will be alone responsible in longer run for non comparability of the Ratios.

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