Question

Which statement about a ratio calculated in the analysis of financial statements is true?

a) it expresses a mathematical relationship between two numbers.
b) it is meaningful only if the numerator is greater than the denominator.
c) it restates all items on a financial statement in terms of dollars of the same purchasing power.
d) it shows the dollar increase from one year to another.

Answer 1

The correct statement about a ratio calculated in the analysis of financial statements is option a) it expresses a mathematical relationship between two numbers.

Step-by-step explanation:

The correct statement about a ratio calculated in the analysis of financial statements is option a) it expresses a mathematical relationship between two numbers.

Ratios in financial statements are used to analyze the relationship between different financial figures, such as revenue to expenses or assets to liabilities. Ratios help to understand the financial health and performance of a company.