To get a proper picture of the position of the organization,common-size statements and ratios should be compared to
A) the organization's future historical performance.
B) the leading competitor in the industry.
C) the financial performance of the overall U.S. gross domestic product (GDP).
D) the direct competitor least like the organization.
E) industry-wide average trends.

Question

Quizplus · Accepted Answer

Common-size statements and ratios provide a better understanding of the organization's financial performance when compared to industry-wide average trends. This allows for a more accurate evaluation of the organization's position within the industry, identifying areas where the organization may need to improve to remain competitive. Comparing to the organization's future historical performance, the leading competitor, or the overall GDP may provide some context but would not be as relevant for identifying industry-specific challenges and opportunities. And comparing to a direct competitor least like the organization may not provide helpful insights into the organization's own strengths and weaknesses.

To Get a Proper Picture of the Position of the Organization,common-Size