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What is the purpose of using ratios in financial analysis?
What is the purpose of using ratios in financial analysis?
- To calculate the exact revenue of a company
- To simplify data for financial statements
- To highlight trends and variances (correct)
- To assess employee performance
What can ratio analysis help users understand about a business?
What can ratio analysis help users understand about a business?
- How the business operates (correct)
- The location of the business
- The number of employees in the business
- The founder's favorite color
Why is it important to analyze variances highlighted by ratios?
Why is it important to analyze variances highlighted by ratios?
- To ignore potential issues in the financial statements
- To identify reasons behind changes in financial performance (correct)
- To make financial data harder to understand
- To increase the complexity of financial analysis
Which type of ratios express relationships between different figures in financial statements?
Which type of ratios express relationships between different figures in financial statements?
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What do profitability ratios measure about a business's financial performance?
What do profitability ratios measure about a business's financial performance?
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What is the main advantage of using ratios in financial analysis?
What is the main advantage of using ratios in financial analysis?
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How do profitability ratios assist in financial analysis?
How do profitability ratios assist in financial analysis?
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Which statement best describes the purpose of trend analysis using ratios?
Which statement best describes the purpose of trend analysis using ratios?
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'Inventory turnover rate' is an example of which type of ratio?
'Inventory turnover rate' is an example of which type of ratio?
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