In order to understand if the results of ratio calculations indicate a financially strong company,the results:
A)Should be compared to other firms in the same industry.
B)Are compared to same size firms in the same geographic region of the country.
C)Are compared to the norms established by generally accepted accounting principles.
D)Are compared to the largest firms in the country.

Question

Quizplus · Accepted Answer

Comparing the results of ratio calculations to other firms in the same industry allows for a more accurate assessment of the company's financial strength and performance compared to its competitors. This is a more relevant benchmark than comparing to same size firms in the same geographic region or to the largest firms in the country. Results can also be compared to industry averages or benchmarks established by financial analysts.

In Order to Understand If the Results of Ratio Calculations