The usefulness of ratios is enhanced by comparisons. The most common comparisons are:
A)history, national performance measures, and budget.
B)history, competition, and budget.
C)history, stock market indexes, and competition.
D)competition, budget, and internal financing sources.

Question

Quizplus · Accepted Answer

Comparing ratios over time (history) can give insight into a company's performance trends, but understanding how a company is doing relative to its competitors (competition) and how it is managing its budget are also important. By comparing ratios to industry averages or specific competitors, investors can assess how well a company is performing compared to its peers. Additionally, comparing a company's financial performance to its budget can help identify areas where the company is over- or under-spending. Therefore, the most common comparisons are history, competition, and budget (Choice B).

The Usefulness of Ratios Is Enhanced by Comparisons