Accounting Methods and Principles
Financial ratios may not be directly comparable between companies that use different accounting methods or follow various standard accounting practices. Most public companies are required by law to use generally accepted accounting principles for their home countries, but private companies, partnerships and sole proprietorships may not use accrual basis accounting. Large multi-national corporations may use International Financial Reporting Standards to produce their financial statements, or they may use the generally accepted accounting principles of their home country.
There is no international standard for calculating the summary data presented in all financial statements, and the terminology is not always consistent between companies, industries, countries and time periods.
Read more about this topic: Financial Ratios
Famous quotes containing the words accounting, methods and/or principles:
“I, who am king of the matter I treat, and who owe an accounting for it to no one, do not for all that believe myself in all I write. I often hazard sallies of my mind which I mistrust.”
—Michel de Montaigne (1533–1592)
“I believe in women; and in their right to their own best possibilities in every department of life. I believe that the methods of dress practiced among women are a marked hindrance to the realization of these possibilities, and should be scorned or persuaded out of society.”
—Elizabeth Stuart Phelps (1844–1911)
“The machines that are first invented to perform any particular movement are always the most complex, and succeeding artists generally discover that, with fewer wheels, with fewer principles of motion, than had originally been employed, the same effects may be more easily produced. The first systems, in the same manner, are always the most complex.”
—Adam Smith (1723–1790)