(b) Ratio analysis in general can be useful in comparing the performance of two
2021-04-25
(b) Ratio analysis in general can be useful in comparing the performance of two companies, but it has its limitations.
Required:
State and briefly explain three factors which can cause accounting ratios to be misleading when used for
such comparison. (6 marks)
正确答案：(b) (i) One company may have revalued its assets while the other has not.(ii) Accounting policies and estimation techniques may differ. For example, one company may use higher depreciation ratesthan the other.(iii) The use of historical cost accounting ma
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