Benchmark for performing financial statement analysis

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Reference no: EM13803335

Industry average financial ratios are often used to benchmark the ratios of firms that are being analyzed. When this is done we look for deviations from the average that may indicate either a problem or strength of the subject firm.

Concept Check 4.4

1. Describe how time series comparisons of a firm’s ratios provide a benchmark for performing financial statement analysis.

2. Why is the selection of a proper set of peer firms so important when using them as a benchmark of performance?

Reference no: EM13803335

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