CFA Practice Question

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CFA Practice Question

Analysts should go beyond the "bottom line" when analyzing and interpreting financial statements because ______
A. non-recurring items included in net income affect ratio analysis.
B. calculations of trends and ratios are unreliable.
C. math errors are sometimes made.
Explanation: To avoid reaching incorrect conclusions, analysts should go beyond the "bottom line" when analyzing and interpreting financial statements because nonrecurring items included in net income affect ratio analysis. The calculations of trends and ratios are based on the assumption that net income and other components are comparable from year to year and from company to company. Going beyond the "bottom line" means looking at the components that created the final result, in this case, net income, which is used in ratio analysis. If non-recurring items exist, they should be considered when making interpretations.

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