CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

You are comparing two companies by looking at financial ratios they publish in their annual reports. You know that ______

I. you must be careful because not all financial statement ratios are computed the same way.
II. the financial ratios of a large firm and a medium-size firm cannot be compared.
III. these financial ratios will capture the relevant differences between the two firms, leaving you with no need to look at the rest of the reports.
A. I only
B. II only
C. I and III only

User Contributed Comments 9

User Comment
yesficom Size is to be taken into account when looking at ratios
jonhy No. Size does not matter: that's why we use ratios (relative values) instead of absolute values
MaiHuong why financial ratio can be computed in different ways? i think they have to follow the same rule
copus I was under the impression that ALL financial ratios are calculated in the same way. Clearly the inputs to these ratios may be calculated based on different assumptions, but the ratio is objectively defined - it is a formula!
carlos2 No copus. Although the definitions of the formulas are the same but the definitions of inputs can be different for different companies.
Sam123456 I've heard that size matters though.
davcer inputs are different thus the calculation can be different
NickGerli II and III are more obviously wrong.
dbalakos Yes!! Of course you can compare a growth company with a value company!! Come oon
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