Accounting - 0452 CIE

Inter-business Comparison

Gbogbo ọrọ náà

How do you know whether a 20% gross margin is good? One powerful answer is to look at a similar business. Inter-business comparison sets one firm's ratios beside another's, so strengths and weaknesses stand out that a single set of accounts could never reveal. If one shop earns a better return on its capital, or collects from customers faster, the comparison shows it plainly and points to where the other could improve.

In this lesson you will learn how to compare the ratios of two businesses and draw sensible conclusions about profitability, liquidity and efficiency. Just as importantly, you will learn why such comparisons must be handled with care: different accounting policies, different sizes, different year ends and missing non-financial information can all make a comparison misleading if you ignore them.

Ebumnobi

  1. the factors that may affect the ratios of two businesses.
  2. the problems of inter-business comparison.

Nkuzi Olu

Gee ntị na nkuzi a na ngwa

Maapụ uche

E seela isiokwu a ka ị hụ otu echiche si ejikọta.

Mepee maapụ uche na ngwa

Kaadị ncheta

Omume ncheta ngwa ngwa n'ihe a na-anwale n'isiokwu a.

Mee omume kaadị ndị a na ngwa

Akwụkwọ Ọmụmụ

A ratio means far more when it has something to be measured against. Comparing a business with a similar rival, or with the typical figures for its trade, shows whether it is leading or lagging. But a careless comparison can mislead just as easily as it informs, so a good analyst knows both how to compare and when a comparison cannot be trusted.

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Nnyocha Ọmụmụ

Ekele diri gi maka imecha ihe karịrị na Inter-business Comparison. Ugbu a na ị na-enyochakwa isi echiche na echiche ndị dị mkpa, ọ bụ oge iji nwalee ihe ị ma. Ngwa a na-enye ụdị ajụjụ ọmụmụ dị iche iche emebere iji kwado nghọta gị wee nyere gị aka ịmata otú ị ghọtara ihe ndị a kụziri.

Ị ga-ahụ ngwakọta nke ụdị ajụjụ dị iche iche, gụnyere ajụjụ chọrọ ịhọrọ otu n’ime ọtụtụ azịza, ajụjụ chọrọ mkpirisi azịza, na ajụjụ ede ede. A na-arụpụta ajụjụ ọ bụla nke ọma iji nwalee akụkụ dị iche iche nke ihe ọmụma gị na nkà nke ịtụgharị uche.

Jiri akụkụ a nke nyocha ka ohere iji kụziere ihe ị matara banyere isiokwu ahụ ma chọpụta ebe ọ bụla ị nwere ike ịchọ ọmụmụ ihe ọzọ. Ekwela ka nsogbu ọ bụla ị na-eche ihu mee ka ị daa mba; kama, lee ha anya dị ka ohere maka ịzụlite onwe gị na imeziwanye.

  1. An inter-business comparison is most valid when the two businesses are: A. In different trades B. Of very different sizes C. Similar in type and size D. From different countries Answer: C
  2. Business X has a higher gross margin than Business Y, but Business Y has a higher profit margin. The most likely reason is that Business Y: A. Sells at higher prices B. Controls its expenses better C. Has more inventory D. Has a lower revenue Answer: B
  3. Which of the following would make a comparison between two businesses misleading? A. They use the same depreciation method B. They have the same year end C. They use different inventory valuation methods D. They are in the same trade Answer: C
  4. A factor that influences a business's success but does NOT appear in its accounting ratios is: A. The gross profit B. The skill of the workforce C. The cost of sales D. The revenue Answer: B
  5. Comparing ratios for one year only is a problem because: A. Ratios cannot be calculated for one year B. Trends cannot be identified and the year may not be typical C. The figures are always wrong D. One year is always atypical Answer: B

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