Many financial analysts substitute one amount for another in making ratioanalysis comparisons in order to better achieve intercompany or companyto-industry data comparability. Which of the substitutions described herewould not achieve better data comparability (for the ratio indicated) underany situation?a. Cost of goods sold for sales—in the numerator of the inventory turnoverratio.b. Cost of plant and equipment for net book value—in the numerator of theplant and equipment turnover ratio.c. Expected future earnings per share for current earnings per share—in thedenominator of the price/earnings ratio.d. Average net assets for average total assets—in the denominator of the returnon investment ratio.
Many financial analysts substitute one amount for another in making ratio
analysis comparisons in order to better achieve intercompany or companyto-industry data comparability. Which of the substitutions described here
would not achieve better data comparability (for the ratio indicated) under
any situation?
a. Cost of goods sold for sales—in the numerator of the inventory turnover
ratio.
b. Cost of plant and equipment for net book value—in the numerator of the
plant and equipment turnover ratio.
c. Expected future earnings per share for current earnings per share—in the
denominator of the price/earnings ratio.
d. Average net assets for average total assets—in the denominator of the
on investment
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