To be useful,a ratio must be compared with the same ratio from previous periods,compared with ratios of other companies in the same industry,or compared with industry averages.

Question

Quizplus · Accepted Answer

Ratios are used to evaluate a company's performance and financial health. However, to derive meaningful insights from ratios, they must be compared with ratios of the same company from previous periods, ratios of other companies within the same industry, or industry averages. Comparing ratios with benchmarks is essential to determine whether a company is performing well or not.

To Be Useful,a Ratio Must Be Compared with the Same