Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 13 - Financial Analysis: The Big Picture - Questions: 7

Answer

(a) Comparative analysis of financial performance can be of three types: i) Intracompany basis- Comparison within a company is called Intracompany, and is useful to detect changes in financial relationships and significant trends. ii) Intercompany basis – Comparison with other company provide insight into a company's competitive position. iii) Industry averages - Comparison with industry averages provide information about a company's relative position within the industry.

Work Step by Step

(b) The comparison is useful for analysis of financial performance: i) Intracompany basis. Intracompany comparison is useful to detect changes in financial relationships and significant trends. ii) Intercompany basis – Intercompany Comparison provide insight into a company's competitive position.
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