When using financial ratios, the most important comparisons are to those of previous years for the company and to industry averages or similar companies for the same year.

Question

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Comparing financial ratios to previous years for the company helps track performance over time and identify trends, while comparing to industry averages or similar companies provides context and benchmarks for evaluating the company's performance relative to peers.

When Using Financial Ratios, the Most Important Comparisons Are to Those