To determine whether a pharmaceutical company's profitability ratios indicate strength or weakness, we should
I. compare them to others in the same industry.
II. compare them to companies in unrelated industries such as energy or banking.
III. compare them to previous years.
IV. compare them to absolute standards established by the CFA Institute.

Question

Quizplus · Accepted Answer

To accurately assess a pharmaceutical company's profitability ratios, it's essential to compare them to others within the same industry to understand industry-specific performance standards and to historical data to identify trends over time. Comparing to unrelated industries or relying solely on absolute standards may not provide a meaningful context for evaluation.

To Determine Whether a Pharmaceutical Company's Profitability Ratios Indicate Strength