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Financial statement analysts must be sure that comparable data are used among companies to make the...

Financial statement analysts must be sure that comparable data are used among companies to make the comparisons valid. Select one True False

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Answer #1

The given statement is true.

Financial statement analysis must be sure that comparable data are used among companies to make the comparison valid.

Explanation: The biggest limitation of comparing the ratios of different companies is that each company uses a different method and principle (which are allowed by GAAP) for their financial statement preparation. Hence, comparison could be made only if companies use comparable data.

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