Yardstick

A yardstick originally meant a flat wooden board that measures lengths of up to three feet. By extension, a yardstick now means a standard used for comparisons. In the sphere of economics, a typical yardstick would be gross national product, the consumer price index, the inflation rate, or the trade deficit. In the semiconductor industry, a well-known yardstick is the book-to-bill ratio. In equity analysis, the price/earnings ratio is a key yardstick. In many areas of economic and financial analysis, a single yardstick does not offer a full picture of success or failure. Moreover, compared with a three-foot wooden yardstick, often a business yardstick is more ambiguous and open to interpretation and dispute. For example, any yardstick based on accounting rules necessarily reflects the limitations inherent in GAAP.