Home › US CMA Part 2 › Financial Management › Using Financial Information and Accounting › Over what stretch of time are a firm's ratios ty…
Over what stretch of time are a firm's ratios typically compared?
ATypically one to two years
BTypically three to five years
CTypically six to eight years
DTypically ten to twelve years
Answer & Solution
Correct answer: B. Typically three to five years
1. A single ratio means little on its own, so it needs a basis for comparison.
2. Ratios are compared over time, typically across three to five years.
3. They can also be compared to industry averages or to another company in the same industry.
4. Period-to-period and industry comparisons are what let anyone answer whether a particular ratio is good or bad.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 14 "Using Financial Information and Accounting", section 14.7 Analyzing Financial Statements_
Related questions
What does a debt-to-equity ratio above 100 percent tell you about who is funding the firm?A bakery reports total liabilities of $70,150 and owners' equity of $78,750. What is its dHow is the debt-to-equity ratio calculated, and which direction is generally better?Why can no single inventory turnover value be called good for every firm?Cost of goods sold was $112,500, beginning inventory was $18,000 and ending inventory was How is the inventory turnover ratio calculated?What do activity ratios reflect?A bakery earned a net profit of $32,175 and has 10,000 shares of common stock outstanding.