When a Firm's Ratios Vary from the Average Ratios of Similar

question 78

True/False

When a firm's ratios vary from the average ratios of similar firms in the industry,this indicates that the small business is in financial jeopardy.

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Definitions:

Internal Rate

Often referred to as the internal rate of return (IRR), it is a financial metric used to estimate the profitability of potential investments.

Annual Cost Savings

The reduction in costs realized over a year, from actions such as process improvement or cost-cutting measures.

Discount Rate

The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows or to assess the attractiveness of an investment.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts.