Question

In: Accounting

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.


Related Solutions

what can be a limitation of the accounting ratios for analyzing the financial statements
what can be a limitation of the accounting ratios for analyzing the financial statements
what constitutes "consolidated financial statements. Explain the meaning of consolidated financial statements. the definition of consolidated...
what constitutes "consolidated financial statements. Explain the meaning of consolidated financial statements. the definition of consolidated financial statements from the FASB's Master Glossary. outline the year-end steps to comply with the new FASB statements.
Which of the following statements represent a weakness or limitation of ratio analysis?
A company reports accounting data in its financial statements. This data is used for financial analyses that provide insights into a company's strengths, weaknesses, performance in specific areas, and trends in performance. These analyses are often used to compare a company's performance to that of its competitors, or to its past or expected future performance. Such insight helps managers and analysts improve their decision making. Most decision makers and analysts use five groups of ratios to examine the different aspects of...
Which of the following is considered to be a limitation of income statements? Select one: a....
Which of the following is considered to be a limitation of income statements? Select one: a. Income statements depend on accounting methods selected. b. Income statements evaluate past performance. c. Income statements predict future performance. d. Income statements assess uncertainties of achieving future cash flows.
C. You are the financial controller of ABC plc which prepares consolidated financial statements in accordance...
C. You are the financial controller of ABC plc which prepares consolidated financial statements in accordance with International Financial Re porting Standards (IFRS). Your managing director, who is not from finance area, has some questions related to financial reporting on small and medium enterprise (given below): i. Why do small and medium entit ies , need not comply with the detailed requirements of IFRS ? ii. Is it true that there are different accounting rules which are available for small...
Company A released financial statements for year end 2021. The financial statements were consolidated financial statements,...
Company A released financial statements for year end 2021. The financial statements were consolidated financial statements, which combined results of their own business, with the results of Company B. Based on this information, what type of business combination occurred on the date these two companies combined ? A) Statuatory Acquisition B) Statuatory Consolidation C) Statuatory Merger D) Hostile Takeover
Noncontrolling interest appears in the financial statements of: the parent company and the consolidated financial statements...
Noncontrolling interest appears in the financial statements of: the parent company and the consolidated financial statements the consolidated financial statements only the subsidiary company and the consolidated financial statements the parent company only
For what purposes are the consolidated financial statements prepared?
For what purposes are the consolidated financial statements prepared?
How can you identify and summarize the noncontrolling interests accounting in the consolidated financial statements.
How can you identify and summarize the noncontrolling interests accounting in the consolidated financial statements.
The case for consolidated financial statements (CFS) presumes that the separate legal entity principle can be...
The case for consolidated financial statements (CFS) presumes that the separate legal entity principle can be ignored. Is this presumption valid, in your view? Explain your position.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT