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Which of the following is correct regarding the process of benchmarking? It occurs when a company...

Which of the following is correct regarding the process of benchmarking?

  1. It occurs when a company increases the price of its products and reduces operating expenses.
  2. It enhances financial analysis by comparing a company’s financial ratios with those of competing companies in the same industry.
  3. It creates substantial sales growth for most companies.
  4. It is also called trend analysis.
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Answer #1

The correct choice is - It enhances financial analysis by comparing a company’s financial ratios with those of competing companies in the same industry.

During the benchmarking process, any business can compare itself against a standard and develop a consistent way of measuring performance. For this purpose, it will analyze in common areas that we may want to target for benchmarking like performance, and profitability, etc. by financial ratios.

Thanks & all the best...

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