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The Comparison of a Particular Ratio to the Standard (Industry

question 44

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The comparison of a particular ratio to the standard (industry average) is made in order to isolate any deviations from the norm. In the case of ratios for which higher values are preferred, as long as the firm that is being analyzed has a value in excess of the industry average it can be viewed favorably.


Definitions:

Cash Flows

Cash flows describe the total net cash and equivalents moving into and exiting a company.

Rate of Return

The positive or negative change in an investment's value over a determined period, indicated as a percentage of the investment’s buying price.

Sole Shareholder

An individual or entity that owns 100% of the shares of a company, holding complete ownership.

Annual Percentage Rate

The annual rate charged for borrowing or earned through an investment, which includes all fees and costs.

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