Why Is an Inter-firm Comparison Useful?
Explanation
The published trading and profit and loss accounts and the balance sheets along with the annual reports provide scanty data for purposeful study and assessment of the performance of a company.
The figures available from these reports just indicate, in a general way, the profitability, stability, solvency, and growth of an organization, but they do not throw light on whether a company has made the optimum use of all the available resources in men, materials, etc.
However, depends fully on the availability of more detailed data, and the possibility of comparison with the competitive units in the same line of manufacture.
It is the inter-firm comparison that provides the management with a vivid comparative picture of how its operating performance, financial results, and product cost structure compared with those of other firms of similar size, nature, industry, or trade.