Suppose you are comparing two firms in the steel industry.One firm is large and the other is small.Which type of numbers would be most meaningful for statement analysis?
A)Absolute numbers would be most meaningful for both the large and small firm.
B)Absolute numbers would be most meaningful in the large firm;relative numbers would be most meaningful in the small firm.
C)Relative numbers would be most meaningful for the large firm;absolute numbers would be most meaningful for the small firm.
D)Relative numbers would be most meaningful for both the large and small firm,especially for interfirm comparisons.
E)It is not meaningful to compare a large firm with a small firm.

Question

Quizplus · Accepted Answer

Relative numbers, such as ratios, allow for more meaningful comparisons between firms of different sizes by standardizing financial information.

Suppose You Are Comparing Two Firms in the Steel Industry