Which of the following statements is correct?
A)A ratio calculation is most relevant in isolation.
B)One of the advantages of ratio analysis is that it allows companies of different sizes to be compared.
C)Finding benchmarks for comparison is a straightforward task.
D)It is always preferable to compare a company's performance to industry-wide ratios rather than to use a competitor's ratios.

Question

Quizplus · Accepted Answer

One of the advantages of ratio analysis is that it allows companies of different sizes to be compared. Ratio analysis helps to remove the bias of size differences and allows for a more direct comparison. This is one of the key advantages of using ratios as a tool for financial analysis. The other statements are incorrect: A) Ratio calculation is not relevant in isolation as it only provides a snapshot of the situation at a particular point in time. C) Finding benchmarks for comparison can be challenging and requires significant research and analysis. D) Comparing a company's performance to industry-wide ratios and its competitors' ratios are both important, and it depends on the purpose of the analysis.

Which of the Following Statements Is Correct