Financial statements, also known as “industry norms” or “operating ratios” are used when comparing a company's performance to competitors in its industry. Financial and operating ratios are derived from company annual financial statements. The financial information is converted into ratios in order to provide a basis for comparison. Ratios are calculated for categories such as liquidity, asset management, debt management, profitability, and market value. They are used to study changes in a company's operations over time. Ratios for a particular company are also compared with those for the industry as a whole or with those for a specific competitor or group of competitors. The purpose is to identify and then analyze deviations from industry averages. These figures are published by industry groups, banks, and trade associations for use as benchmarks. They are compiled by analyzing the financial statements of companies in that particular industry and calculating the mean or average figure for selected categories.
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