Question : Which of the following statements is true?
Option 1: A ratio could be compared or benchmarked with the last year’s ratio. It is also known as time-series analysis and past ratio.
Option 2: A ratio could be compared with the ratios of similar firms in the same industry or by industry average at the same point of time. It is known as cross-sectional analysis.
Option 3: Rule of thumb’ based upon well-proven conventions have evolved over a period of time.
Option 4: All of the above.
Correct Answer: All of the above.
Solution : Answer = All of the above.
Ratios can be compared with past ratios (time-series analysis), with ratios of similar firms or industry averages (cross-sectional analysis), and can be guided by established conventions or "rules of thumb" for evaluation. Hence, the correct option is 4.
Question : When comparison is to compare a firm’s present ratios with its past ratios. When ratios of the same firm over a period of time are compared, it is known as the
Question : ------------------involves the comparison of a firm’s ratios with that of some selected firms in the same industry or industry average at the same point of time. Such a comparison is helpful in assessing the relative financial position and performance of the firm.
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