Ratio analysis works best when evaluating the financial statements of two firms
A)in the same industry but located in different countries.
B)of differing sizes in the same industry.
C)with one being in a single line of business while the other is a conglomerate.
D)of the same size in differing industries.
E)when both are conglomerates with varying lines of business.

Question

Quizplus · Accepted Answer

Ratio analysis is most effective when comparing firms that are in the same industry, as this provides a baseline for industry-specific performance. However, when comparing firms of different sizes within the same industry, adjustments may need to be made to ensure accurate comparisons.

Ratio Analysis Works Best When Evaluating the Financial Statements of Two