Question

21) Which of the following is the definition of benchmarking? A) Benchmarking is the study of percentage changes in financial statement line items year to year. B) Benchmarking is the analysis of a financial statement that shows each item as a percentage of net sales or total assets. C) Benchmarking is the practice of comparing a company with other companies in that industry D) Benchmarking is the comparison of two companies using horizontal analysis 22) Please refer to the following trend analysis of Pathways Company: 2015 $4.970 113.0% 2014 $4,500 102.3% Net sales Percentages 2013 $3.980 90.5% 2011 $4,750 108.09 2012 $3,270 74.396 2010 $4.400 100.0% Which of the following is a correct conclusion from the above analysis? A) Net sales in 2013 were equal to 90.5% of year 2012 net sales B) Net sales in 2013 were up 90.5% over the previous year C) Net sales in 2013 were equal to 90.5% of 2010 net sales D) Net sales in 2013 were down 90.5% from year 2010

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Answer 1

21. Option C Benchmarking is a analytical process in which the company's products, costs, services etc are compared with the peers in the same industry to find out if there are any places to improve.

22. Option C 2010 is given as base year for trend analysis. Hence 100%. 2013's net sales is given as 90.5% of the base year (that is 2010's net sales)