Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

Question:

How are ratios used for various comparisons in business analysis?

Options:

They are used to assess the quality of employees

They are used to replace financial statements

They are used to compare performance with benchmarks and standards

They are used to set industry standards

Correct Answer:

They are used to compare performance with benchmarks and standards

Explanation:

Ratios should not be calculated for a single year alone. When multiple years' figures are harmonized, they become instrumental in revealing identifiable trends within the business. Understanding these trends becomes invaluable for projecting the future trajectory of the business, rendering this feature highly advantageous.