Which of the following industries has the highest average inventory turnover ratio?
A) Retail clothing stores
B) Jewelry stores
C) Automobile dealerships
D) Supermarkets
Which of the following would be most responsible for a company's average collection period being higher than the industry average?
A) If a company's growth in sales is greater than the growth of sales in the industry.
B) Being more aggressive in collecting its accounts receivable than its competitors.
C) Having credit policy standards that are more restrictive than its competitors.
D) Being more lenient in extending credit to its customers than its competitors.
When the present financial ratios of a firm are compared with similar ratios for another firm in the same industry, it is called trend analysis.
Answer: FALSE
Firms that engage in multiple lines of business make it difficult to assign them to an industry category for ratio analysis.
Answer: TRUE
A small start-up company should choose an industry leader in the same industry as a benchmark.
Answer: FALSE
Companies chosen for benchmmarks should be of similar size and in the same or a similar industry.
Answer: TRUE
