The comparison of a particular ratio to the standard (industry average) is made in order to isolate any deviations from the norm. In the case of ratios for which higher values are preferred, as long as the firm that is being analyzed has a value in excess of the industry average it can be viewed favorably.

Question

Quizplus · Accepted Answer

A higher ratio than the industry average is not always favorable, as it may indicate inefficiencies or risks depending on the context of the ratio and the industry.

The Comparison of a Particular Ratio to the Standard (Industry