In regards to benchmarking, which of the following statements is incorrect? A. Benchmarking is the practice of comparing a company with other leading companies. B. The two main types of benchmarks in financial statement analysis include benchmarking against the industry average and benchmarking against a key competitor. C.The industry average is not a useful benchmark for evaluating a company. D. Providing commonminus−size percentages in a graphical manner highlights differences

In regards to benchmarking, which of the following statements is incorrect? A. Benchmarking is the practice of comparing a company with other leading companies. B. The two main types of benchmarks in financial statement analysis include benchmarking against the industry average and benchmarking against a key competitor. C.The industry average is not a useful benchmark for evaluating a company. D. Providing commonminus−size percentages in a graphical manner highlights differences

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter7: Analysis Of Financial Statements

Section: Chapter Questions

Problem 6Q: Why is it sometimes misleading to compare a company’s financial ratios with those of other firms...

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Similar questions

Which is not a potential problem of utilizing ratio analysis? A. trends and industry averages are historical in nature. B. financial data may be distorted due to price-level changes. C. firms within an industry may not use similar accounting methods. D. all of the above E. answer not given
A company can use comparisons of its financial data to the data of other companies and industry averages to evaluate its position. Group of answer choices True False
Explain why balance sheet accounts are generally “averaged” and income statement figures are just lifted from the income statement when using them as factors in a particular financial statement ratio? How do the DuPont technique helps the firm’s managers to further analyze its returns?
Which of the following is not one of the typical uses of financial ratios? a. Comparisons to a company’s historic values b. Comparison to benchmarksc. Comparison to competitors’ values d. Comparison to zero with positive values indicating desirable ratios and negative values indicating undesirable ratios.
Which of the following statements regarding the current ratio is true? a.The current ratio is more useful than working capital in making comparisons across companies. b.The current ratio is not useful in making comparisons with industry averages. c.Working capital is more useful than the current ratio in making comparisons across companies. d.All of these statements are true.
To evaluate a company’s performance, investors need a benchmark to which they can compare its financial ratios. What are some of the problems associated with these comparisons?
When using ratio data for comparison to other companies, analysts should: not interpret the data as a way of determining which companies will survive and outperform others. only use data from one time period. not assume that all companies in the industry are in direct competition. use industry averages, rather than individual companies, for the comparison.
What are the limitations to using financial ratio analysis [such as profitability ratios, liquidity ratios, gearing ratios, and investment ratios] computed from the financial statements of a company. What other alternatives could have been used to decide on the performance and investment-worthiness of a company.
Which of the following is NOT a type of ratio analysis used by managers to interpret the numbers in financial statements? O liquidity O operating O activity O profitability
Which of the following is NOT correct about the financial ratios? Select one:a. Financial ratios are based on the estimated values of balance sheet and income statement accounts.b. Financial ratios can be viewed as equalizers, allowing for relative comparisons to be made. c. Financial ratios are one of an analyst’s most powerful tools, converting financial statement information into a form that is easier to analyze.d. The examination of financial ratios provides insights into how a firm has performed historically and how it is performing relative to its competitors and its industry.
Which of the following statements is not true about the current ratio? A benchmark of 3.00 to 1.00 is believed to be the ideal benchmark for the current ratio of a company. The current ratio measures an organization’s liquidity. The current ratio is found by dividing current assets by current liabilities. A current ratio below 1.00 to 1.00 signals the potential for financial difficulties.
No single ratio can predict the success or Failure of a company. What different types of Ratios are necessary for financial analysis? How is the Return on Assets (ROA) Ratio Calculated?