When you are interpreting financial ratios, it is useful to compare a company's ratios to the same ratios from a prior period or to the ratios of another company in the same industry.

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Comparing a company's ratios to the same ratios from a prior period can reveal trends and changes over time. Comparing them to the ratios of another company in the same industry can provide insight into how the company is performing relative to its peers.

When You Are Interpreting Financial Ratios, It Is Useful to Compare