Question

please I want someone who is sure from his answer.

i calculated a bunch of ratioes for a certain comanpy and after that there is this question

why do you think using industry meadian is a good idea to compare company X’s performance?

why not use Industry average? Do you see any issues using industry median for comparison?

Answer 1

Why do you think using industry median is a good idea to compare company X’s performance? Why not use Industry average?
Sometime, Ratio of any one company may be much higher or lower result into Industry average is become worthless. Because of too many variations of the ratio of one company. Using the Industry median such problem should not arise.
Let's take one example for the current ratio of the company.
Industry has only 5 company
Company	Current ratio
Company 1	2.10
Company 2	1.80
Company 3	2.40
Company 4	1.90
Company 5	15.20
Total	23.40
Industry average (23.40/5)	4.68
Industry Median (1.80,1.90,2.10,2.40,15.20) (Hint: central value of above ratio = 2.10)	2.10
If you compare with average then the comparison is not a good idea because of Company 5 have too much current ratio. It is advisable to use the industry median instead of the industry average. Industry median gives an accurate result for comparison for this example.
Do you see any issues using industry median for comparison?
Generally, no issue with industry median for comparison. However, the industry median is better for comparison compared to the industry average.