Which of the following is a limitation of consolidated financial statements? Consolidated financial can mask the...

Which of the following is a limitation of consolidated financial statements?

Consolidated financial can mask the performance of weaker companies.

Ratios and percentages derived from consolidated financial statements can be deceptive because they are composite (weighted) averages.

Consolidated statements can eliminate detail about product lines, divisional operations, and the relative profitability of various business segments

Answers “a” and “b” only

All of these are limitations of consolidated financial statements.

Solutions

Expert Solution

Answer is point number 1 - Consolidated financial can mask the performance of weaker companies.

Point number 2 is not a limitation as ratios and percentages derived from consolidated financial statements are not based on composite (weighted) averages.

Point number 3 is also not a limitation as consolidated financial statements required segment information which would disclose the product lines, divisional operations and relative profitability of various business segments.

ekkarill92 answered 1 year ago

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