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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:

Bell Shaped Distribution

A probability distribution that forms a symmetric bell-shaped curve, commonly associated with the normal distribution.

Coefficient of Variation

A uniform metric showing the spread of a probability or frequency distribution as a percentage relative to the average.

Standard Deviation

A statistic that measures the dispersion or variation of a set of data points from their mean.

Variance

A measure of how much the values in a dataset vary or deviate from the mean, technically the average of the squared differences from the Mean.

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