Question

The concept of "benchmarking" is: a. The process of comparing a particular company with a subset of the competitors in the industry b. An analysis of a firm’s financial ratios over time c. Using a group of ratios that show the combined effects of liquidity, asset management and debt on operating results d. The use of debt as a financing tool e. Using a group of ratios to show the relationship of a firm’s cash and other current assets to its current liabilities

Answer 1

Answer:

a. The process of comparing a particular company with a subset of the competitors in the industry

Explanation:

The concept of Benchmarking is basically used to compare the processes and performances of business with it's competitors using measures to industry bests practices.

Therefore, b. An analysis of a firm’s financial ratios over time is an internal measure while benckmarking is an external measure.

c. Using a group of ratios that show the combined effects of liquidity, asset management and debt on operating results is once again an internal metric not an external one.

d. The use of debt as a financing tool this statement is it's self vague, therefore is incorrect.

Finally the last option, e. Using a group of ratios to show the relationship of a firm’s cash and other current assets to its current liabilities is only comparing with it's own cash and other current assets to its liabilities rather than with it's competitors.

Hence, a. The process of comparing a particular company with a subset of the competitors in the industry is the correct option.