Which of the following best describes external benchmarking using trend analysis for a subsidiary of an international company?

Question

Options

• AComparing the current ratio of the subsidiary with the current ratio of another company for the
• BComparing common-size financial statements of the subsidiary with the averages of the industry
• CComparing the sales of the subsidiary with the sales of another subsidiary for the last two periods.
• DComparing the sales of the subsidiary with the budgeted figures for the last two periods

• A
  5% (1)
• B
  81% (17)
• C
  5% (1)
• D
  10% (2)

Explanation

External benchmarking using trend analysis involves comparing a company's performance metrics with industry standards or averages over a certain period to identify trends and areas for improvement. Comparing common-size financial statements of the subsidiary with the averages of the industry for the last two periods allows for a normalized comparison by expressing financial statement items as a percentage of a common base figure (e.g., total assets or sales). This method highlights the subsidiary's financial structure and performance trends in relation to industry norms, facilitating a comprehensive analysis.

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