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JAMB Principles of Accounts 1994 Question 42

Question 42

Interpretation of Accounts

An advantage of using accounting ratios is that they

  1. A.can be easily calculated
  2. B.facilitate decision making
  3. C.are stipulated by law
  4. D.show errors and frauds
Show the answer and explanation

Answer: B (facilitate decision making)

Explanation

Ratios summarise performance and position so that managers and investors can compare and make decisions.