In using industry benchmarking and comparisons:
A) The industry averages are valuable because they apply to all firms within an industry.
B) One should avoid generalizations such as current ratios should be 2 to 1.
C) One gains valuable projections and forecasts.
D) Industry averages are universally applicable because they mask the effects of firm size.

Question

Quizplus · Accepted Answer

Generalizations such as all companies should have a current ratio of 2 to 1 should be avoided. The adequacy of a current ratio depends on the composition of current assets, how quickly they will convert to cash, and how soon the current liabilities must be paid.

In Using Industry Benchmarking and Comparisons