Question : Which of the following statements is false?
Option 1: False Accounting Data Gives False Ratios
Option 2: Comparison is not possible if different firms adopt different accounting policies
Option 3: Ratio Analysis becomes more effective due to price level changes
Option 4: None of the above
Correct Answer: None of the above
Solution : Answer = None of the above
False accounting data can lead to inaccurate ratios, misrepresenting a company's financial position and performance. Comparison becomes challenging when firms use varied accounting policies, as it distorts financial data consistency, hindering accurate assessments of performance and financial position across companies. Price level changes can indeed enhance the effectiveness of ratio analysis by allowing adjustments to reflect inflation or deflation impacts, thereby providing a more accurate evaluation of a company's financial status and performance.
Hence, the correct option is 4.
