The most effective method of directly evaluating the financial performance of a firm is to compare the financial ratios of the firm to:
A)the firm's ratios from prior time periods and to the ratios of firms with similar operations.
B)the average ratios of all firms within the same country over a period of time.
C)those of other firms located in the same geographic area that are similarly sized.
D)the average ratios of the firm's international peer group.
E)those of the largest conglomerate that has operations in the same industry as the firm.

Question

Quizplus · Accepted Answer

Comparing a firm's financial ratios to its own ratios from prior time periods is important to measure the firm's growth and development. Comparing the ratios to other firms with similar operations helps to benchmark the firm's performance against industry competitors. This provides a more accurate understanding of the firm's financial health and competitiveness in the market.

The Most Effective Method of Directly Evaluating the Financial Performance