Which of the following statements is true regarding ratio analysis?
A) A ratio for a particular company is often compared to industry standards using various publications.
B) Ratio analysis should be kept as simple as possible, which is often accomplished by using just one ratio to measure a company's performance.
C) A ratio for a particular company is unique and, therefore, should not be compared to other companies' ratios.
D) Ratio analysis will not be affected by different accounting methods or assumptions.

Question

Quizplus · Accepted Answer

Ratio analysis is commonly used to compare a company's performance to industry standards using publications such as financial magazines, industry reports, or databases. Comparing a company's ratios to those of its competitors and industry averages can help identify areas of strength and weakness.

Which of the Following Statements Is True Regarding Ratio Analysis